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Tags: dick durbin | credit card | transaction fee

Dick Durbin Again Trying to 'Help' Little Guy, But Credit Card Plan Will Only Hurt

a credit card with perks written on it
Sen. Durbin's plan on credit card interchange fees will only end up hurting consumers

Jared Whitley By Monday, 08 March 2021 11:45 AM Current | Bio | Archive

Just a month and a half in office and Democrats have damaged the economy even more than we could have predicted. Biden's anti-energy policies have driven the cost of oil up 70%. The stock market is off course and everyone suspects it will crash, but don't get excited about moving to cash because inflation under Biden will be positively Carter-esque.

And they're just getting started. Calls for insane minimum wage hikes will trigger mass layoffs, and Biden picked for his secretary of commerce the governor of the state ranked dead last for business.

Democrats' destroying the U.S. economy is all the rage, and since Sen. Dick Durbin (D-Ill.) wants in on the action, he's decided to hurt normal Americans trying to use credit cards.

Durbin wants to mandate price controls on interchange fees, what credit card companies charge for the privilege of their service. Card networks set these fees for acquiring banks to pay issuing banks, but the cost is passed on to merchants, which is why they'll frequently prefer people pay with debit, in cash, or, increasingly, in crypto.

To help blunt the damage of the corona recession, credit card companies have been charging less, but now they need to get back to normal. Visa and Mastercard want to raise the interchange fees – the most substantial change to the interchange rate after a decade of rising costs and inflation – but Durbin and others want to impose price controls to force them not to.

Because there's an army of professionals working hard behind the scenes to make sure using a credit card is easy for consumers, and those people need to be paid, too. Democrats always behave as though the economy runs because of invisible magical gnomes, but – spoiler – it doesn't.

Credit card companies need to keep the lights on, and if Washington interferes with their business, the costs will invariably be passed along to the consumer. That's what always happened. One would think that Durbin, having botched this once before, would have learned his lesson, but apparently not.

One of the absolute worst measures in the disastrous Dodd-Frank bill was the Durbin Amendment, which – along the same lines with what he's trying to do now – forced price controls on banks and credit unions for the debit-card fees that they charge retailers. So instead of merchants paying for these costs, they were passed on to consumers in the form of reduced benefits and higher fees.

This cost-shifting hurt those who could afford it the least, according to a a 2014 George Mason University study. It found that by 2011 the Durbin Amendment led to 1 million Americans becoming "unbanked."

Indeed, the Durbin Amendment also cost issuers more than $90 billion in lost revenue that could have expanded services to the unbanked and underbanked such as free checking accounts that provide financial security and help climb the economic ladder, according to reports by the Electronic Payments Coalition (EPC) and Federal Reserve Bank of Richmond.

While there's no good reason for Durbin's behavior for the public at large, there's a good reason for big retailers to shift these costs shifted to consumers. Their lobbyists know that, and they make sure that Durbin dances to their tune while he fakes doing the "help the little guy!" two-step.

Even former Rep. Barney Frank – the lead author of the disastrous Dodd-Frank – understands this concept at this point. He said in a 2011 interview with Reuters, "I regard this as mostly a dispute between two groups of businesses, banks and retailers, and the consumer gets squeezed. The banks will charge you more, and I don't think the retailers are going to charge you less, which is why I didn't want to put it in the first place."

The need to treat corporate America as a scapegoat is wrong, and attacking them like this to help the consumer only hurts the consumer. Maybe instead of trying to ruin as much of the rest of the country as he can, Illinois' senior senator could come up with ways to try to fix Chicago first. Tall order, but it would be a better way to spend his energy.

Jared Whitley is a long-time politico who has worked in the U.S. Congress, White House and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's reports — More Here.

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Democrats' destroying the U.S. economy is all the rage, and since Sen. Dick Durbin (D-Ill.) wants in on the action, he's decided to hurt normal Americans trying to use credit cards.
dick durbin, credit card, transaction fee
Monday, 08 March 2021 11:45 AM
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