Swipe Fee Reform Would Help The Cash-Strapped Consumer

by Sarah Grotta 0

An article in Forbes highlights the recent proposed legislation to pull back on the interchange caps for debit. The very pro-repeal article makes the point that consumers never benefited from the Durbin Amendment in the form of lower prices at the checkout:

Of course, like all of our country’s past price controls, this one has failed miserably. Yes, corporations have seen a decrease in credit card fees, but as one would suspect the fee burden has instead been shuffled onto consumers in the form of higher prices. Banks were immediately forced to increase the fees charged on checking accounts. In fact, just months after the Durbin Amendment’s passage, Bank of America announced that it would start charging customers a monthly $5.00 debit card fee to offset revenue losses. Scores of other fees came shortly after. Overall, it is estimated that this cutthroat law now costs consumers up to $8 billion annually.

The article also makes the point that many miss, which is businesses selling products with a low price point are also being hurt:

Small business owners have also been saddled with higher costs as a result of the Durbin Amendment. Before Dodd-Frank’s passage, most card processors based fees on the cost of the purchase value. Now, however, in an effort to combat revenue losses, card companies and issuing banks have begun charging the same fee amount for smaller transactions as they do for large transactions. As a result, the local bagel store owner is now faced with the same 22-cent fee on a $1.00 order that a jewelry store owner does on a $350 order.

The author makes a strong appeal for support of the legislation that would un-do much of the Durbin Amendment’s impact on debit card revenue:

Thankfully, this train wreck piece of legislation is poised be dispelled and removed with the help of the majority of House Republican. Rep. Neugebauer’s bill, H.R. 5465 — which House Financial Services Committee Chairman Jeb Hensarling included in his financial reform framework — will soon come up for a vote to repeal the Durbin Amendment once and for all. It’s time for the Republican-controlled Congress to join these two money where their mouth is conservatives in repealing this burdensome, job-killing regulation. The sooner they do, the sooner that every American with a bank account will be left with more of their hard-earned money each month.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

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