Interchange Bill – Why Should I Care?

Our financial system and the broader economy depend on a proper balance of capitalistic endeavors and government regulation. Over the last several years, we’ve witnessed what can go wrong when that balance is tilted too far to one extreme… Equally damaging, however, is the continuous seesawing between regulation designed to “keep things in check” to regulation that over-reaches in search of potential problems in our financial system. The Durbin Amendment to the Dodd-Frank Bill is just that.

This regulation, if enacted, would basically create price controls on debit interchange fees, meaning that it would force banks to offer debit cards at prices below what it costs banks to operate.  

If this sounds unreasonable to you, that’s because it is….

If you are asking “why should I care?” then you should know that the cost of your banking services will increase dramatically if this is implemented. The convenience of using a debit card is not disputed… Think of every time your checkout line has been halted in the past by someone writing a check… Would you trade the convenience of using your debit card and return to the days of going to the bank to cash your check? Or stopping at an ATM more often to refill your cash supply?

The Durbin Amendment will force banks to either restrict the usage of debit cards, or charge for other now free products, like checking, in order to pay for this convenient system… Who loses? You, the consumer. Who wins? The merchants, in one of the largest transfers of revenue in the history of our banking system. Why are we doing this? No one really knows for sure…

So as you read about this brawl in the newspaper and think that it does not affect you, think again…You might want to let your U.S. Senator know that price controls generally do not function, and in the end, the unintended consequences usually hurt those that were intended to be helped…

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