The Durbin debit card dupe
By Frank Keating December 10, 2011 10:24AM
Updated: January 12, 2012 8:22AM
Sen. Richard Durbin’s crusade against U.S. banks has blinded him to an undeniable reality: His price-fixing schemes have hurt the very consumers whose interests he claims to protect.
Contrary to his statements in the media and on the Senate floor, consumers have not received a single benefit from his so-called “Durbin Amendment,” which cut in half the price retailers pay to process debit card transactions. Our nation’s big-box retailers, however, have fared quite well, receiving a $7 billion windfall in profits annually from Durbin’s actions. Meanwhile, banks have been hit with a 45 percent reduction in the revenue they depended on to provide low-cost accounts, fight fraud and maintain the U.S. payments system.
What about consumers? They now pay higher costs for basic banking services — and continue to search in vain for the savings retailers promised to pass along.
These consequences didn’t come without warning. Community groups and economists, including Federal Reserve Chairman Ben Bernanke, cautioned Durbin that his price caps on debit card fees would harm consumers, but he refused to listen. In his zeal to punish banks, he could not comprehend that his special-interest giveaway to big-box retailers could harm people — particularly low-income Americans. Unfortunately, and quite predictably, that’s exactly what has happened.
Bank customers are now paying for services they previously enjoyed free. Free checking is becoming harder to find and debit rewards programs have become a thing of the past. These are real consequences as banks of all sizes continue to adjust to government-imposed losses in revenue.
Of course, any rise in the cost of financial services will most negatively affect Americans least able to absorb the increase. The Federal Reserve Bank of Boston just released a paper studying the new regulations. To no one’s surprise, it predicts that lower-income individuals will be those most impacted. Over the past year, this concern was voiced time and time again as community organizations worried about the regulation’s potential impact on the most vulnerable populations. Once again, Sen. Durbin refused to listen.
Maybe Sen. Durbin will listen to the question we’ve heard most often: Will consumers ever see savings at the register from the Durbin Amendment? The prospects are bleak. It appears that, despite promises to the contrary, our nation’s big-box retailers have chosen to simply pocket the money.
Perhaps it’s time for Sen. Durbin, in his supposed campaign to protect consumers, to call for an investigation into whether giant retailers have lowered prices for their customers as a result. We’re sure Americans would be interested in the findings.
We won’t hold our breath. It seems Sen. Durbin’s vendetta has blinded him to what’s best for consumers. And that’s very unfortunate.
Frank Keating is president and CEO of the American Bankers Association and former governor of Oklahoma.