Comment to FRB on debit card routing rules

We file a comment (downloadable on this page) to strongly support a Federal Reserve Board proposal to clarify that the 2010 Durbin amendment to the Electronic Fund Transfer Act requires card issuers to provide merchants with more routing choices, including onto at least two debit card networks not affiliated with Visa or Mastercard, both in card present retail and online (card not present) transactions. The comment period closed yesterday. The proposed regulation simply clarifies that merchants are not being given the routing choices required by law, which is anti-competitive, raises prices, limits choice and harms consumers and the financial marketplace. 

Excerpt from our attached comment:

“Much of the bank, credit union and card network complaining about the Durbin amendment, especially during the implementation of Regulation II, had focused on its cap on certain debit card swipe fees. Now, they defend their defiance of the Durbin amendment’s much more important routing requirements.

The Durbin amendment was always about more than stopping excessive rent-seeking. It was also designed to promote the development of a competitive payment network marketplace. The Notice of Proposed Rulemaking sends an important signal that conduct inconsistent with the Durbin amendment will not be tolerated.

The Federal Reserve’s NPR makes simple clarifications that protect the Section 920 routing provisions that promote competition.

In particular, the NPR would make clearer that EFTA Section 920 and its regulations do:

1)    “forbid issuers and payment card networks from restricting the number of such networks to fewer than two unaffiliated networks  (“prohibition on network exclusivity”)” and 

2)    “forbid issuers and payment card networks from directly or indirectly inhibiting any person that accepts debit cards for payment from directing the routing of an electronic debit transaction over any network that may process that transaction (“prohibition on routing restrictions”).”