As the campaign season is now in full swing, many voters are tuning into politicians that are saying and do anything to get elected. However, there are some leaders that truly take on the hard work of legislating and work tirelessly to try and solve the problems of hardworking Americans. That is why the Electronics Payments Coalition is commending House Financial Services Chairman Jeb Hensarling for putting serious thought and initiative into creating The Financial CHOICE Act.
The bill’s name stands for Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs, and would help boost the economy by creating more competition while providing much needed relief from overly burdensome regulations. Of critical importance to our coalition is repealing the harmful federal price controls of the Durbin Amendment that mandated debit card acceptance fees.
Chairman of the Subcommittee on Financial Institutions and Consumer Credit, Congressman Randy Neugebauer also deserves to be recognized for taking up the cause of directly repealing the Durbin Amendment with the introduction of his stand-alone bill HR 5465.
National retail trade groups spearheaded by the Merchants Payments Coalition claim that the Durbin Amendment has benefitted consumers. This is far from the truth. The Federal Reserve Bank of Richmond released a comprehensive report and found that when interchange fees decreased as a result of the Durbin amendment, they didn’t pass savings along to customers like they promised. According to the study, “few merchants are found to reduce prices or debit restrictions as debit costs decrease.”
In fact, lower-income customers are feeling the most pain from this merchant markup because they now have less money and perks to cope with their financial situations. According to the Federal Reserve of Boston, these folks are twice as likely to own a debit card than a credit card. A big reason that they choose to rely on using debit cards is because lower-income customers “strongly prefer the set-up, security and control of debit cards” which they saw as an effective money management tool to keep them within their budgets.
The Durbin Amendment has now changed the budget planning and savings strategies of many lower-income customers. They now have to pay more out of their own pocket due to the slashing of debit card rewards. These customers also have to deal with new and higher bank fees which are required to cover the costs of debit cards, and the introduction of fee-based checking accounts which may now require minimum balances to qualify for free checking.
What ends up happening is that these consumers get hit twice by the retailers. They see none of the promised savings in lower priced goods and then lost their rewards and no fee checking accounts all because of the Durbin amendment aka “merchant markup.”
The only group that has benefited from the Durbin Amendment is the special interests that pushed for it—big box retailers. They have been pocketing six to eight billion dollars every year since it became law while customers have yet to see one dime of it. That is why the propaganda machine from Hensarling’s opponents is now operating in full swing. In fact, they have even gone so far as to claim it actually helped community banks and credit unions because they are exempt from it. However, the small banks and credit unions along with consumers and small businesses—have also fallen victim to these harmful price controls.
The Durbin Amendment mandated a number of new unfunded regulations that these institutions now have to unfairly manage when their focus is supposed to be on providing important high quality, low cost financial services. In the end, the customers are the ones who are negatively impacted by these changes.
We look forward to working with Congress on ending this failed policy and providing meaningful financial reform. American small businesses and hard working families and consumers deserve no less. We hope that lawmakers will support passage of HR 5465 and repeal the Durbin Amendment.
Molly Wilkinson is the executive director of the Electronic Payments Coalition.