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Capping interchange fees has been tried in some countries around the world. Despite claims that these efforts were for the benefit of consumers, the real world results have shown the opposite to be true. In every instance, consumers faced higher fees for banking services, a reduction in benefits and services and saw no return in the form of lower prices from merchants despite promises by merchants and policy makers to pass savings to consumers.
At first blush, you might well wonder why anyone would be against loyalty programs. Whether you earn points by shopping at a particular store or by using a particular credit card, you are rewarded for your loyalty. Maybe you exchange your points for a discount on airfare for a sun-filled vacation. It’s all voluntary, and everyone involved seems to benefit.
Sen. Dick Durbin, D-Ill., slipped into the monstrous 2010 Dodd-Frank financial regulation bill a favor long sought by big-box retailers, such as Wal-Mart. The Durbin amendment, as it is known, imposed price controls on interchange fees for debit cards. Interchange fees are what banks and card issuers charge retailers for processing payments. Many consumers prefer to use cards instead of cash, so it’s advantageous for retailers to provide that as an option.
Christmas is the time for goodies and gifts but lobbyists for the retail industry’s are hoping Congress grants their wish list of crony capitalist giveaways that will cost consumers while increasing their own profit margin. Andrew Langer, the President of the Institute for Liberty, is pulling the alarm on the crony scheme pushed for by lobbyists for the retail industry to impose federal price controls on credit card fees: “Congress should reject European price controls,” that “while America’s regulatory costs have ballooned since 2005, Europe’s have positively skyrocketed. Thankfully, the United States has not copied the statist policies in many European counties that hamper economic growth. But right now, well-funded lobbyists are pushing a European idea that the government should set price controls on payment processing fees. These same lobbyists were successful five years ago in implementing a cap on card swipe fees, yet that was not enough for them. They … Continue reading
Most in politics can understand it when those firmly on the progressive side make the argument that we in America need to enact public policy more like that of Europe. But when one American industry is locked in a battle with another, and seeks to use the force of the federal government to intervene in that fight, Members of Congress should know not to buy that bill of goods when one industry wants the federal government inflicted on another just to increase their bottom line at the expense of the other. Such is the case with the latest push by the retail lobby to enact European type price controls on the interchange fees charges to retailers for accepting debit and credit cards from their customers.
Last week The Hill ran a piece by Merchant Payments Coalition Chairman and National Retail Federation SVP Mallory Duncan, in which he asked Congress to adopt a European model of price fixing and give big box retailers a multibillion handout at the expense of American consumers. For those who have been following the payments industry for the past decade, his demand for government price fixing of credit interchange rates – the fee that merchants pay to accept credit cards — will come as no surprise. What makes this demand so remarkable is the fact that it blatantly ignores the failures of these policies in the U.S. and around the world.
They say that imitation is the sincerest form of flattery—and a corollary to that adage is the idea that if you want to be successful, you look at someone who has achieved success and build on how they got there. The opposite, of course, is to imitate folks who are less successful and think, somehow, that this is a recipe for success. Yet that seems to be what some folks continually call for when they want the U.S. to be “more like Europe” economically—Europe, whose socialist and quasi-socialist policies have led to complete economic stagnation. Although the American economy has experienced slow growth in recent years, the numbers show that our growth far exceeds the growth experienced in Europe. One reason is that American consumption rates are at far higher levels than in your average European nation.
If you’ve ever had a credit card number stolen, you know what a serious pain it can be. Losing a card to fraud can be the simple annoyance of your card being cancelled by the watchful credit card issuing company and having to wait for a new card to a full out identity theft which can cost thousands. How are cyber thieves stealing the card numbers? The main way for thieves to get your information comes from beaching the older large department stores’, or “Big Box Stores,” often-antiquated technology. A customer’s single biggest vulnerability for identity theft and credit card fraud is using your card at major retail stores that have repeatedly been breached by hackers. These stores use outdated kiosk computers to process sales. These retailers have allowed clever thieves to install viruses that silently relay customers’ credit card info back to them. This is how Target negligently lost … Continue reading
Sen. Richard Durbin (D-IL), who was wrong about price controls on interchange fees on credit and debit card transactions fives years ago, now sides with the big box stores in pushing for ineffective “chip and pin” protections on credit and debit cards. Durbin is hardly an expert on these issues, but he surely is bought and paid for by retailers. While it’s claimed the lack of these features makes us vulnerable to fraud, the single biggest vulnerability is for identity theft and credit card fraud in your name: it’s using your card at major retail store that have repeatedly been breached by hackers. Contrary to what credit card security expert Durbin claims, more than chip and pin is needed to ensure security of our credit and debit cards. Using outdated kiosk computers to process sales, retailers have allowed clever thieves to install viruses that silently relay customers’ credit card info … Continue reading
Can you really trust Sen. Richard Durbin (D-IL) to stand up for consumers and get it right this time? He claimed fives years ago that putting price controls on credit and debit card translations, something demanded by big box retailers, was in our interest and he turned out to be wrong. We as consumers have not seen any benefit from that. Now the senator, who would have us believe he’s an expert on identity theft and credit card fraud, thinks “chip and pin” features on our credit and debit cards will protect us. But these measures won’t protect us from the instances of hackers obtaining our card data from major retailers like what happened in the last few years with Home Depot and Target where millions of customers had their billing information obtained by hackers. Sen. Durbin has had a cozy relationship with retailers like Wal-Mart and Home Depot. His … Continue reading