Then we might actually want to perk up our ears. I was passed an op-ed in Forbes by Tim Lee, Senior Vice-President of Legal and Public Affairs for the Center for Individual Freedom, that discusses former Congressman Barney Frank’s dismay over the impact that the Durbin Amendment has had on the banking system.
The Amendment (which our two US Senators voted for, but they did vote against the entire Frank-Dodd Act bill) limits the amount of debit card interchange fees that banks can charge. The all-knowing-and-all-powerful federal government didn’t take into consideration the actual cost of building, maintaining, and updating the interchange network, and so the fees were set at a low rate. So, how did the Megabanks compensate? By axing a lot of benefits and services to its “lower value”, let’s say, customers. We saw a lot of free checking accounts dry up or have a lot more requirements for it to stay “free”:
As a result of the Durbin Amendment, which cost banks over $8 billion in the first year alone, consumers have witnessed the disappearance of free-checking accounts, and suffered an onslaught of additional bank fees. Local credit unions and small community banks (supposedly “exempt” from the amendment) have continued to see an alarming rate of foreclosures, and local economies have continued to suffer. Additionally, consumers have yet to see savings at the check-out line – the original intent of the amendment in the first place. Rife with unintended consequences, the Durbin Amendment is a perfect example of public policy gone wrong.
So, if it’s such a bad piece of legislation that affects millions of consumers, then why are we persisting in this bad decision? Retailers. Retailers don’t like high interchange fees because it cuts into their bottom line. Anything they can do to cut their expenses, the happier they are…even if that pain is passed on to the consumer.
To be fair, there is a bi-partisan movement afoot to repeal the Durbin Amendment, but there will no doubt be a push by retailers to keep the law as-is.