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  • House Members Ask DOJ to Investigate Bank Fees -- Will the Trail Lead Back to Them?

    Sen. Dick Durbin (D-IL), author of the Durbin Amendment to the Dodd-Frank financial regulatory bill

    When Bank of America announced a new $5 debit card fee in late September (along with a slew of other banks), President Barack Obama condemned it, and yesterday some Democrat Members of Congress called on Attorney General Eric Holder to launch an investigation. Unfortunately, they’re setting their sights on the wrong target. Instead of taking banks to task for the new charges, they should focus their attention on the “Durbin Amendment” to the Dodd-Frank financial regulatory reform law, authored by Senator Dick Durbin (D-IL).

    This week, five House Democrats sent a letter to Holder in which they allege that banks have colluded in deciding to impose new fees, writing:

    Statements made by individual banks and their trade associations raise questions about whether some price increases that have occurred this year have actually been coordinated… We are concerned that [Bank of America]’s announcement may be a reaction to, and participation in, price signaling or collusion that has occurred among and between banks and bank associations.

    Likewise, President Obama criticized the banks’ fees and used them as an excuse to advance his Consumer Finance Protection Bureau (CFPB)–a regulatory agency with unparalleled powers and virtually no accountability:

    “(T)his is exactly why we need this consumer finance protection bureau that we set up that is ready to go … (T)his is exactly why we need somebody who’s sole job it is to prevent this kind of stuff from happening. … (Y)ou can stop it because it — if you — if you say to the banks, ’You don’t have some inherent right just to, you know, get a certain amount of profit. If your customers are being mistreated.’

    For these Democrats to call for an investigation into businesses reacting to “price signaling” is tantamount to alleging capitalism is illegal. And what they ignore is the real reason for the new fees. Under the Durbin Amendment, the federal government now limits the amount of money banks can charge merchants when you swipe your debit card, costing them an estimated $6.6 billion per year in revenue. Deprived of fees from merchants, banks are looking to make up the revenue taken away by the price controls.

    Broken down into simpler terms, there was a cause, and then there was an effect. The cause was a new regulation that led to banks losing $6.6 billion in revenue. The effect was banks looking elsewhere to make up their costs. And when government imposes new costs, businesses can choose to transfer them to customers. Likewise, those customers can decide to take their business elsewhere.

    It’s simple enough to understand, but evidently not for Washington politicians who want to demagogue banks to score populist points, divert blame from, themselves, and use the issue as an excuse to expand the power of the state.

    Posted in Featured [slideshow_deploy]

    7 Responses to House Members Ask DOJ to Investigate Bank Fees -- Will the Trail Lead Back to Them?

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    2. Lloyd Scallan says:

      Wait a minute! For these House members to ask THIS DOJ to investigate is more than absure. This DOJ is under "investigation" themseles. This is yet another diversion tactic to fool the American people into thinking they are doing something good for the nation. Nothing could be futher from the truth.

      • Bobbie says:

        good call, Lloyd! Someone better catch it! Pretty soon the people will come to know government IS more trouble then they're worth! I just hope it's peaceful…

    3. gstanski says:

      Before we start railing against BofA's $5 fee or any other of the new fees that big banks have been introducing lately, we should consider what got us at this situation in the first place. All of these reviled fees are in response to the fall in revenues from debit card transactions that are the consequence of the passing of the Durbin Amendment and the Federal Reserve ruling to cap debit interchange at $0.22 + 0.05% of the transaction amount.

      Everyone who was paying attention to what was happening knew that this was coming and warned against it. Here is what we wrote: http://blog.unibulmerchantservices.com/banks-may-

      The point is that, if the government decides that a large portion of a business' revenues would be collected by someone else, the business will look for ways to make up for its losses and they would do it any way they can. Banks are certainly no different.

    4. Angry about rising debit card fees? It's a consequence of Dodd-Frank, the Durbin Amendment & over-regulation from Washington. See for yourself: http://ow.ly/72pK2

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