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  • Durbin Amendment Damage Grows

    Remember when last September Senator Dick Durbin (D–IL) claimed that his contribution to the Dodd–Frank financial regulation statue—“the Durbin Amendment”—would benefit consumers? Well, more evidence has surfaced that his price-control regulation is costing consumers more and more money.

    According to a study by Javelin Strategy and Research reported by Bloomberg on Wednesday, checking account fees have soared by 21 percent in the past six years. Javelin specifically singles out the Durbin scheme and other onerous regulations imposed on financial services as causing much of this increase.

    Meanwhile, The Wall Street Journal reported Thursday that Bank of America and Chase are eyeing new checking account fees to make up for the $12.2 billion that banks are estimated to have lost to the recent flood of regulation.

    The Durbin Amendment took effect last October 1 and limits the amount that banks can charge retailers to process debit card transactions. Popular among major retailers, the provision directed the Federal Reserve to impose a price cap per debit transaction, which was subsequently set at 24 cents (on average). Consequently, retailers are paying banks about 45 percent less than they did prior to the rule.

    Not surprisingly, banks have sought new sources of revenue to make up for the losses—just as critics of Durbin predicted. For example, Heritage’s David John correctly predicted last year that, faced with sharply lower profits from debit card use, “card issuers are almost certain to react by doing one or more of the following: imposing an annual fee on debit cards; raising other fees that would be paid by consumers; or reducing the interest rates paid on consumer deposits. While such a response would hurt all consumers, it would especially damage those with moderate and lower incomes.”

    Congress needs to understand that consumers are being hurt by Durbin’s price controls—regardless of the Senator’s intentions. Services that once were free now cost many people money. It’s time for Congress to repeal this harmful provision.

    Mary Bidgood is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

    Posted in Economics [slideshow_deploy]

    7 Responses to Durbin Amendment Damage Grows

    1. Odie1956 says:

      It benefits us just like the current gas prices!

    2. @joestickney says:

      durbin and shumer deny and are silent on damage done ith finra together with reds bootle neck of house passed bills inactiona

    3. John Q says:

      The problem with too many in Congress is that they lack common sense, or what will happen down the road. That or they just don't care, instead more interested in short-term brownie points by playing off the emotions of their voters for political gain. It wouldn't hurt if the population in general paid closer attention to this type of thing, and see it for what it is…

    4. Keith says:

      God save us from Progressive fools! Durbin, you and your ilk need to go to Venezuela. Stop messing up our American exceptionalism.

    5. guest says:

      Wow. Lots of misunderstanding on this one. It's not the cap on transaction fees that is hurting the consumer. It is the issuing banks trying to make up for lost unearned income. Consumers let the banks get used to having this large income from raping the consumer. Consumers refused to stand up and say enough is enough. Now they try to blame increasing banking fees on regulation. Poo. Banks are going to learn to live on less income. They are going to find new sources – and if not new sources – raise the price on exiting sources/services. Consumers use your brains and learn your history. Political rhetoric is not truth or fact. Consumers need to look for the truth and the facts.

    6. Linda Johnson says:

      Thanks to this amendment most banks are now charging any business (especially small business) an additional fee when they process credit cards thru the bank (Merchant Accounts). S&T Bank has now impossed a $4.95 monthly fee for processing the credit cards thru them. THey say that it is VISA that has started charging them and they are passing it along. It is possible that MasterCard and the others will follow. So to the super small merchants (craft show venders, small mom and pop stores) they will now have to pay the $4.95 per month (per card accepted) plus all the other fees that they have always been charged. This fee will be charged every month even if you don't process any charges during the month – talk about a rip-off! The only way I can pass that fee on is to raise prices – therefore consumer gets hurt! This is sooooo wrong! People need to start writing letters to Congress, President and everyone else!

    7. Dan Lighter says:

      This new rule of durbin amendment is helpful for many peoples. Online payment is quick and convenient for bank customers. Reduces Debit Fees make customers more happy.

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