Durbin Files Amicus Brief In Support Of Illinois Interchange Fee Prohibition Act

Durbin Files Amicus Brief In Support Of Illinois Interchange Fee Prohibition Act

The amicus brief filed in the District Court for the Northern District of Illinois lays out the structure of the Durbin Amendment, which aligns with the recently enacted Illinois Interchange Fee Prohibition

CHICAGO - U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee and author of the Durbin Amendment, filed an amicus brief in the District Court for the Northern District of Illinois in support of the recently enacted Illinois Interchange Fee Prohibition Act (IFPA). IFPA, which was signed into law on June 7^th, bars the charging of interchange fees on the tax and tip portions of credit and debit card transactions. Last month, the Illinois Bankers Association, along with the American Bankers Association, America's Credit Unions, and the Illinois Credit Union League, filed a lawsuit, Illinois Bankers Association v. Raoul, claiming IFPA is preempted by federal law, including the 2010 Durbin Amendment. The bankers' motion for a preliminary injunction currently is pending before the court.

The amicus brief states, "Senator Durbin is uniquely positioned to offer an important perspective on the operation of the Durbin Amendment and how Illinois' law aligns with it. This perspective will help the Court decide the pending motion and resolve the case."

The amicus brief describes how IFPA is consistent with the Durbin Amendment's intent. The Durbin Amendment created a ceiling-not a uniform standard-for debit interchange fees that card networks like Visa and Mastercard were facilitating on behalf of financial institutions that issued their network-branded cards. By imposing such constraints, the Durbin Amendment sought to reduce the billions of dollars per year in excessive debit interchange fees that were being charged to merchants and which were borne ultimately by consumers in the form of higher retail prices.

The amicus brief continues, "The purpose of the Durbin Amendment was to rein in centrally-fixed debit interchange fees that had been insulated from competitive market forces and resulted in excessively high fees that burdened merchants and consumers. The Durbin Amendment and its implementing Regulation II did so by establishing a fee maximum for any debit interchange fees that networks like Visa and Mastercard fixed on covered issuers' behalf. The IFPA aligns with the Durbin Amendment's text, structure, and purpose. Like the Durbin Amendment, the IFPA only applies to fees that are price-fixed by networks on behalf of issuers. The IFPA defines the fees it regulates as fees 'established, charged, or received by a payment card network for the purpose of compensating an issuer for its involvement in an electronic payment transaction'-a definition that closely aligns with the Durbin Amendment's definition."

The amicus brief concludes, "In short, the IFPA is both consistent with the Durbin Amendment and consistent with sound policy that will help protect merchants and consumers from excessive and anti-competitive fees."

Durbin's amicus brief to the District Court for the Northern District of Illinois can be read in full here.

In Congress, Durbin has made it a priority to protect consumers. Durbin's Credit Card Competition Act is bipartisan legislation that would enhance competition and choice in the credit card network market, which is currently dominated by the Visa-Mastercard duopoly. It is estimated that businesses paid more than $100 billion in swipe fees on Visa- and Mastercard-branded cards in 2023 alone.

Building off of debit card competition reforms enacted by Congress in 2010, the Credit Card Competition Act would direct the Federal Reserve to ensure that the largest credit card-issuing banks offer a choice of at least two networks, one of which must be a network other than Visa and Mastercard, over which an electronic credit transaction may be processed.

Visa and Mastercard wield enormous market power in credit cards; according to the Federal Reserve, they account for nearly 576 million cards, or about 83 percent of general-purpose credit cards. Visa's and Mastercard's market power and network structure have enabled them to impose fees on U.S. merchants that are among the world's highest, charging more than $100 billion in U.S. merchant credit card fees in 2023. These fees include interchange fees which Visa and Mastercard require merchants to pay to issuing banks, as well as network fees that Visa and Mastercard require merchants to pay directly to them. Consumers ultimately pay for all of these fees in the price of the goods and services they buy.

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