WASHINGTON – Sen. Dick Durbin, D-Ill., wrote to Visa on Tuesday to denounce an alleged new fee assessed by the company on credit and debit card issuers that see their business shift to a competing card network.
Durbin said the so-called "Delayed De-Conversion Assessment" applies a 5-basis point charge to the Visa payment volume of any issuer that has seen a decline in Visa payment volume or the number of issued Visa cards. It is also assessed against issuers which have "demonstrated" their intent to change their card network affiliation, according to Durbin.
"Simply put, Visa appears to be imposing a significant penalty on card issuers that try to shift their business from Visa to a competing card network or that see their business shifted to competing networks through market forces," Durbin wrote in a letter to Visa's chief executive officer, Charles W. Scharf.
This is the first official word of such a fee. In a statement issued late Tuesday, Visa acknowledged that it had considered the Delayed De-conversion Assessment, but scrapped those plans last week.
"As we have communicated to Senator Durbin's office, as part of our normal course of business, last week Visa decided not to proceed with the Delayed De-conversion Assessment," the company said. "Visa will be notifying our clients as part of our regular communication process on Thursday."
In his letter, which is dated Tuesday, Durbin asked whether Visa has made information about the fee publicly available so that small banks, credit unions and other stakeholders can learn more about it.
He also is seeking to know the specific amount of decline that triggers the fee, whether small institutions have the right to negotiate the fee and how "does the … fee serve the best interests of small bank and credit union issuers?"
Durbin claimed that Visa card issuers were notified in April about the fee, which was to have gone into effect immediately.
"Were small banks and credit union issuers given any advance notice of the fee's creation in order to give those issuers the opportunity to change card network affiliations before the fee took effect?" Durbin asked.
Durbin notes that the fee comes at the same time that House Financial Services Committee Chairman Jeb Hensarling introduced a Dodd-Frank revamp bill that would repeal the law's Durbin amendment, which forced the Federal Reserve Board to limit interchange fees on debit cards.
"My amendment has worked to enhance competition between card networks and preserve the ability of small banks and credit unions to compete fairly in the card issuance market," Durbin said. "Visa's new fee could diminish competition between networks and penalize small banks and credit union issuers."