Today, Visa’s General Counsel Josh Floum will testify on the debit card regulation provisions of the Dodd-Frank Act before the House Financial Services Subcommittee on Financial Institutions & Consumer Credit. (Watch the Hearing live here beginning at 10:00 AM EST). We appreciate that the House is dedicating time to discuss this important legislation, which has the potential to harm consumers, small financial institutions and the economy as a whole. And we’re encouraged that this price control legislation finally is being debated after being rushed through last year without committee consideration or even a House vote.
Below are a few points Josh will highlight in his remarks before the Committee:
“The proposed regulations would result in a $12 billion annual value transfer to merchants, primarily big box retailers. This makes it virtually impossible for issuers to recover the cost of the infrastructure and operations required to build and manage a world-class debit system and discourages future investment in fraud protection, ecommerce, mobile payments and other innovation.”
“While the direct impact is on debit card issuers–big and small–it is the consumer who ultimately will pay the cost to advance the industry. They will get less as a result of this regulation. The Federal Reserve Board itself admits that its interchange proposal will permit issuers to recover only a small fraction of their debit card costs, but explains that ‘issuers have other sources of revenue . . . such as cardholder fees, to help cover their costs.’ In other words, the Fed suggests raising fees to cardholders.”
“Of note, the routing requirement allows merchants—not consumers or card issuers—to decide how debit card transactions are handled. The new rules deprive the consumer of the ability to choose over which network her transaction will be processed. Now the merchant will decide, without notice to, or consent from, the consumer how money from her DDA accounts is accessed. There is simply no disguising that this is an anti-consumer provision.”
“The Amendment will have significant, long-term consequences for consumers, financial institutions, small businesses and the entire U.S. economy—consequences so fundamental and extensive that their full impact may not be understood for many years. Because of this, Congress should consider extending the implementation date and requesting an impact study on unintended consequences.”