The ‘Durbin amendment’ to Dodd Frank financial reform made it effectively illegal to make money on debit cards. The result was that many bank accounts became unprofitable, banks raised fees elsewhere, and the number of people outside the banking system rose.
After limiting interchange, or swipe fees, for debit cards he’s back trying to limit them for credit cards too. Again, he’s doing the bidding of big retailers.
- Businesses pay for a service – credit cards facilitate payments for their products
- And they’d like to pay less for that service
- Dick Durbin wants the government to force merchant networks to provide this service to businesses at lower prices.
This is not about consumers. Where interchange has been limited, that hasn’t led to lower prices (for anyone).
And it isn’t good for the economy. Making it less profitable to extend credit is bad for households, businesses, and growth.
It isn’t even about fairness. It’s generally cheaper to accept credit cards than cash, because employees miscount change, they pocket cash, and cash needs to be deposited in the bank (indeed, businesses that hold large amounts of cash may face higher insurance costs too).
It is about the government taking money from a disfavored group (card issuers, payment networks) and giving it to a favored group (big retailers).
I haven’t expected this to become law – it’s an election year, control of Congress is split, and the President is formerly Senator from Delaware where the big banks are based. But it’s very convenient as a fundraising tool in an election year, because it shakes loose significant cash from two sides – both of which have significant cash to invest.
The Wall Street Journal, which notes that credit cards are no longer dominant over debit transactions, suggests that a coalition could form to make this legislation viable by bundling rules that would prevent card issuers from discriminating against guns and other disfavored businesses.
At a minimum, Republican legislators concerned about movement in the direction of banning certain types of transactions from incumbent card networks could lead them to support legislation they believe reduces the relative power of those networks and perhaps supports the viability of alternate networks that might be willing to transact with gun dealers (Truth Social but for guns?). Private payment networks can shut down gun transactions in a way that legislators and regulators, constrained by the second amendment, cannot.
Politics isn’t about policy. It’s often about relative status. It’s easy to attack the status of banks, and retailers are often more sympathetic. But framing of ‘banks versus guns’ should raise alarm by those who view the incumbent payment networks as the good guys on guns. If you’re pro-gun control, should you be against bank interchange regulation?
You know the Romans had a saying, “Who profits?” In a post-Citizens United really corrupted government you can expect everyone to still talk big about “making things better for the citizen”. But except for a few genuine idealists improvements will only occur if they don’t cost anybody. It is those with the gold who write the rules. For many years every top official, no matter their party, has known who is pulling the strings, and I have no idea how we can have a stable democracy with this situation.
Can we stop saying the US is a democracy? It’s not and has never been.
Meanwhile , you all keep repeatedly voting these emotionally-driven / logic-deficient clowns who think making money is a bad idea – so not surprisingly, these type of Durbin laws is what you get in return.
What’s next – people shouldn’t have to back their student loans? Oh wait…
Why punish law-abiding citizens because the acts of a small number of criminals? Lock up criminals who commit crimes with guns.
It isn’t like criminals are rolling up with their Platinum card to buy 15 guns for their gang.
If anything, ALL firearm purchases MUST be done with a credit card
Given the rewards they offer I think fees can be reduced without destroying the industry.
As for the gun bit–I dislike the whole concept of trying to kill industries by denying them access to the credit card system. Either the industry is legal (and shouldn’t be blocked) or illegal (and those who engage in it should be prosecuted.) There is no middle ground where it should be legal but it’s right to keep them away from credit cards. (Yes, there are purveyors of illicit goods that are beyond the law. Trying to cut them out of the system is just a game of whack-a-mole, if the local authorities won’t do anything then they won’t stop them from coming back under a new name.)
That being said, there is value to **monitoring** gun transactions. When someone suddenly maxes out their credit with gun type purchases that warrants a prompt investigation.
It’s interesting how consolidation in the financial industry was supposed to result in savings for consumers.. In the time that I have been a financial consumer:
1. Credit cards were free. Now, most have an annual fee.
2. Bank accounts were free. Now, many banking consumers pay monthly fees just to have an account.
3. ATM transactions were free. Now, ATM transactions can cost more than $5.
4. Local banks were held accountable by the communities in search of community growth.. Now, banks are accountable to shareholders in search of investment growth.
Maybe I’m just old. Maybe I remember when businesses didn’t rape and pillage consumers. Maybe it’s a little bit of both.