Community bank momentum continues in Congress with new bill

• Key insight: Sens. Ted Cruz, R-Texas, and Katie Britt, R-Ala., introduced a bill to index the Durbin Amendment’s $10 billion asset threshold to inflation, preventing more community banks from being subject to debit card fee caps as they grow.
• What’s at stake: The Republican-only bill highlights a divide in card fee politics — lawmakers support easing restrictions on community banks while navigating Trump’s proposal for a 10% credit card interest rate cap that has alarmed the banking industry.
• Forward look: The legislation adds to recent Republican efforts to advance community bank relief, including provisions in a House housing bill that would ease brokered deposit rules and streamline bank examinations.

WASHINGTON —  A group of Republican lawmakers are introducing a bill that would index the $10 billion-asset threshold that caps debit card fees in the Durbin Amendment to inflation. 

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The bill itself isn’t bipartisan, although community bank regulatory relief in general has gotten considerable bipartisan support in a number of areas in the last few months in Congress. The bill does, however, signal both a continued momentum for community bank legislation in Congress and Republican lawmakers’ stance on credit and debit card politics. 

The bill, introduced by Sens. Ted Cruz, R-Texas, and Katie Britt, R-Ala. — as well as a companion bill in the House sponsored by Rep. Andy Barr, R-Ky. — would tie the $10 billion-asset threshold below which banks are exempt from the Durbin Amendment to an annual adjustment measured by the Consumer Price Index. Fewer banks would be subject to the limitation on fees charged to retailers for debit card processing, a long-held pain point in Washington by groups representing banks of all sizes. 

In introducing the legislation, the Republican lawmakers are wading into the messy realm of card politics, made even more treacherous in recent months by President Donald Trump’s push for a one-year 10% rate cap on credit card interest rates. The push has worried the banking lobby, although most Republican lawmakers haven’t picked the idea of a rate cap, which would require some kind of legislation. 

Instead, the Cruz-Britt bill won the applause of many banking groups. 

“Indexing the Durbin threshold to inflation is a smart, targeted update that keeps community banks where Congress intended — outside the regulatory regime meant for the largest players,” said Independent Bankers Association of Texas President and CEO Christopher Willston in a statement. “By directing the Federal Reserve to make both the initial catch-up adjustment and annual CPI updates, this amendment brings needed certainty and proportionality to the payments system.” 

The legislation is also a nod toward a major point of emphasis for Republican lawmakers — community bank-friendly legislation. 

Most recently, Rep. French Hill, R-Ark., the chairman of the House Financial Services Committee, got a number of community bank provisions through the lower chamber floor in his version of housing legislation, including bills that would favor brokered and custodial deposits.