Debit card amendment hits consumers in the wallet

Wednesday, June 9th, 2010 By

A portrait of Illinois Senator Dick Durbin. His amendment to the financial reform law involving debit cards and interchange rates will make banking and shopping more expensive for consumers, claims Fox News commentator Dana Perino.

Illinois Senator Dick Durbin (Photo: Wikipedia)

Former White House Press Secretary and current Fox News commentator Dana Perino warns consumers that there’s trouble brewing in Congress. This trouble could make debit card purchases significantly more expensive. To be more accurate, it will actually affect nearly all consumer purchases and debit card interchange fees will be the cause, claims Perino.

Debit card interchange fees mean fast cash for banks

Courtesy of an unheralded amendment to the financial reform law as pushed by Illinois Senator Dick Durbin, the Federal Reserve would take control of fast cash debit card interchange rates. As Dana Perino describes them, an interchange rate is “money that a retailer’s bank pays your bank when you use your credit or debit card at their store.” This money is a valuable resource to smaller financial institutions; without interchange rates, it would be difficult for these smaller banks to offer basic services to their customers.

If the Federal Reserve were to cut off the income stream, smaller banks would have no choice but to pass on the cost to customers. In many cases, this would drive them to larger, more impersonal banks that won’t have as much competition and can charge more for credit services. Consumers who balk at this will have to rely on cash, checks or fast cash short term loans for their transactions, which offer no insurance on the back end in the event of fraud.

Dick Durbin’s amendment sullies advances in financial reform

Dana Perino paints the picture for consumers on the retail end as well. Imagine what retailers will do if debit card transactions cost them more. Of course they’ll pass the cost on to customers. Some retailers do this already, but with Dick Durbin’s financial reform law amendment, it would become commonplace.  In addition, no-fee checking would more than likely disappear, along with various rewards programs as banks look to make up for income lost after the Durbin amendment.

Price controls don’t work

Price controls of this nature have not found much success, historically. The blog Wizbang uses the example of gas prices in Hawaii. Dana Perino points to Australian legislation from 2003. At that time, retailers began to charge extra for consumers paying with plastic, and the trend has continued. What Perino and many other concerned consumers are wondering is how something like the Dick Durbin amendment can sneak in without much attention, and will these consumers have to depend upon fast cash short term loans with no credit check more often.

Sources:

Fox News

Wizbang

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