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And so it proved. Surveys demonstrated that as soon as the Durbin Amendment was passed – even before it went into effect – banks started raising fees and cutting back on free services. The lobby group for continued controls has argued that this cannot have been an effect of Durbin because the law had not got into effect. Yet, people react to what they know is going to happen, and don’t wait until the day of effect to act. The result has been that poor bank customers have been hit hard, with a million people forced out of the banking system as a result of increased fees. There is actually a natural experiment on the effects of interchange fees caps. The Durbin Amendment exempts small banks of under $10 billion in assets from the fee cap. Those banks have not needed to seek revenues elsewhere and so continue to offer … Continue reading
Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card.
According to the rules that have long been in place, a store that accepts credit cards cannot charge more for plastic transactions, though a cash discount may be offered. Other than gas stations, though, almost no retailer has taken advantage of this. All may be changing, however, with the settlement, which allows a store to pump up the price when a customer chooses to pay with credit.
“Rather than accept responsibility and reverse the original bad legislative policy, however, Congress is digging in its heels and blaming the banks just for trying to recoup their losses. Once again, sadly, government intervention in the free market has caused harmful effects on the American people, but the government doesn’t want to be held accountable.”
“Retailers will likely manage to keep some portion of the fees they used to pay to the banks or third party intermediaries. Consumers, meanwhile, will pay the same retail costs as before plus a fee to their bank — thanks to Washington’s interference.”
“Once again, politicians who have never run a company, impose their will on businesses without ever considering the impact on the companies or their customers. There are no winners in this one.”
“It’s hard to see if retailers have indeed passed the savings on to customers, but it’s easy to guess that they have not.”
“The Dodd-Frank banking regulation Democrats passed last year cut by 45 percent the fees banks could charge retailers for debit card transactions. This was no consumer protection. It was a giveaway to major retailers like Walmart, Home Depot and Target, who lobbied hard for the cap.”
“The Durbin Amendment interfered with a market mechanism to choose merchants to be the winners over the banks. That makes consumers, especially the poor, the losers.”
“The new regulations were effective Saturday, and the result is that it takes money away from banks and gives it to retailers. Durbin claimed a cut in these fees would eventually result in lower prices at retail stores.… Instead, many retailers appear to be using the reduced fees to add to their bottom line.”