A recent study from the University of Miami's School of Finance has analyzed the potential impact of proposed mandates in the Durbin Marshall Credit Card Bill and similar state-level interchange legislation. The findings suggest these measures could lead to reduced revenue and increased costs for community banks and credit unions, despite claims of exemptions for smaller financial institutions.
The report states, "Legislation in Congress and numerous states intended to reduce the interchange fees charged by credit cards would significantly reduce revenue for community banks and credit unions and-concomitantly-reduce access to credit in smaller markets across the United States, disproportionately affecting low-income households."
Indraneel Chakraborty, who authored the report titled “Why the Credit Card Competition Act (CCCA) and Similar State Bills Will Hurt Small Financial Institutions,” also shared his insights in an op-ed published on Real Clear Markets. He highlights that "the experience of the 2010 Durbin Amendment should serve as a warning," pointing out that even exempt institutions saw a decline in interchange revenue. This resulted in lower revenue and higher costs for smaller financial entities, hindering their ability to provide affordable banking services.
Richard Hunt, Executive Chairman of the Electronic Payments Coalition, echoed these concerns: "The study confirms what many local institutions have been saying: the proposed credit card mandates are a bad deal for local communities." He criticized supporters of the mandates for not understanding how the payments system operates, arguing that exemptions provided are merely superficial.
Hunt further noted that community banks and credit unions across all states oppose this bill due to its potential negative impacts. These include loss of revenue crucial for serving communities and increased banking service costs for customers, particularly those in rural or low-to-moderate income areas.
The study warns that state-level efforts to impose new mandates on credit cards could similarly harm Main Street financial institutions, potentially leading to consolidation among community banks or forcing customers towards larger institutions.
Investment in new technologies and national data security standards is suggested as a means to strengthen the payment system instead.