Show-Me State Times

Indraneel Chakraborty, a Professor of Finance at the Miami Herbert Business School, has expressed concerns regarding proposed legislation aimed at reducing credit card interchange fees. He said that such measures could negatively impact community banks and credit unions by diminishing their revenue.

"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," said Chakraborty.

According to Congress.gov, the Credit Card Competition Act, also referred to as the "Durbin-Marshall Credit Card bill," aims to decrease interchange fees by mandating that networks other than Visa and Mastercard be available for transactions. Proponents of the bill argue that it will foster competition among payment networks and reduce costs for merchants. However, critics contend that it could lead to decreased revenue for community banks and credit unions, potentially affecting access to credit.

The Electronic Payments Coalition has reported that previous similar legislation, such as the Durbin Amendment, resulted in reduced revenue for small financial institutions without providing significant cost savings for consumers. Community banks and credit unions have experienced financial pressures due to lowered interchange fee revenue.

An article from the Missouri Independent highlights concerns about how the Credit Card Competition Act might adversely affect small businesses in Missouri. Local business owners and community banks have voiced worries about reduced access to affordable credit, fearing that lower interchange fees could hinder their ability to sustain operations.

Chakraborty is a Professor of Finance at the Miami Herbert Business School, University of Miami. His research primarily focuses on financial intermediation, banking, and the economic impact of financial regulations. He has authored numerous papers examining the effects of policy changes on financial institutions.