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The changes are expected to eliminate about 40 percent of the credit and debit card fraud in this country. But the changes caused by those tiny computer chips will also mean you’ll have to use payment terminals differently, and this could lead to longer lines in stores and restaurants, probably for several months as consumers and companies adjust.
C-SPAN3 aired a clip of Rep. Jeb Hensarling at an American Enterprise Institute event last week discussing the negative consequences of Dodd-Frank, including the reduction of free checking accounts due to the Durbin amendment.
ABA this week is running ads in Capitol Hill publications and on D.C.-area talk radio stations urging Congress to let the payments industry continue to develop innovative solutions to secure payments — and not mandate static technologies such as chip-and-PIN, which is fast becoming out of date.
American consumers are seeing the consequences of these burdensome regulations. For example, before Dodd Frank, 75% of banks offered free checking and in 2012, only 39% of banks continued to do so. Similarly, the minimum average balance necessary to qualify for free checking has doubled over the same time period. Many attribute this to the bill’s Durbin Amendment, which imposed price controls on the interchange fee (paid between banks for the acceptance of card based transactions) charged for debit cards. Additionally, a study by the International Center for Law and Economics found low income families are being hit the hardest. The center estimates that from 2014-2017, $1 billion to $3 billion annually will be transferred from low-income households to large retailers and their shareholders as a result of the Durbin Amendment.
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
Sheila Bair criticized the Durbin amendment on FOX’s “After the Bell” saying that she doesn’t believe retailers are passing along savings from the amendment.
For more on Dodd-Frank’s five-year trail of destruction—from Durbin Amendment price controls on what banks may charge retailers to process debit cards that have sent checking account fees soaring to the requirement that manufacturers disclose their use of “conflict minerals” from the Congo—read the recent congressional testimony of CEI Chairman and George Mason University Law Professor Todd Zywicki.
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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which turns five years old today, has been costly for credit unions and is no reason for celebration, NAFCU President and CEO Dan Berger writes in an op-ed in today’s American Banker. Credit unions didn’t cause the financial crisis of a few years ago, says Berger, but they’ve paid a high price in new regulatory burdens for Wall Street’s antics since Dodd-Frank was signed into law. Berger noted that the 2010 statute spawned the Consumer Financial Protection Bureau and an onslaught of new regulations. While larger credit unions (those over $10 billion in assets) are exempt from CFPB examination and enforcement authority, all credit unions are feeling the crushing effects of the bureau’s rulemaking, he writes. “Dodd-Frank has created a huge regulatory morass that has stifled innovation, delayed economic growth and sped consolidation within the credit union industry,” Berger says. “The … Continue reading
U.S. banks are steadily shipping more secure chip-embedded credit and debit cards to consumers, but industry attention is also focused on whether merchants have installed updated payment terminals to accept the new cards.