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In Washington, sometimes the facts get in the way of a good story when it comes to advocating for changes to public policy. Eventually, the facts have the pesky ability to expose the cold hard truth of a well-spun fairy tale. This is what happened when price controls were enacted on debit card transactions and consumers suffered as a result. An amendment authored by Senator Durbin was attached to Dodd-Frank and passed in the dead of night with little scrutiny or debate. The provision, which dictates price controls on debit card transactions, was hailed as a consumer benefit because advocates said that the money it generated would go directly back into the pockets of hardworking Americans. Continue Reading
While few senators attended the Senate Banking Committee’s hearing on the effects of consumer finance regulations, Senate Democrats blasted Senate Republicans for trying to kneecap the CFPB and questioned one witness’ judgement about the agency at Tuesday’s event. During his opening statement, ranking member Sherrod Brown (D-Ohio), chided the committee’s Republicans for having forgotten the recent financial crisis and the reasons why the CFPB was developed. He told committee members to resist the collective amnesia in the hearing room and in Congress. Continue Reading
EPC To Fed Chair: Durbin Amendment Rewards Retailers $36 Billion in Additional Profits, But Provides No Relief to Consumers
Electronic Payments Coalition Executive Director Molly Wilkinson today wrote Fed Chair Janet Yellen to express concerns regarding the detrimental effect the Durbin amendment is having on consumers. In the letter, which was submitted pursuant to the regulatory review being conducted under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), Wilkinson details how the Durbin amendment never fulfilled its promise of lowering costs to consumers at checkout, but has instead allowed retailers to pocket approximately an additional $36 billion in profit. Citing a recent August 2015 Federal Reserve Bank of Richmond study, Wilkinson notes that few merchants are found to reduce prices or debit restrictions as debit costs decrease. In another survey 92% of the nearly 2000 consumers questioned reported that prices rose or stayed the same over the previous year. “…[this] study confirms what common sense and economic theory tell us – that is, retailers never had any … Continue reading
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.