John Berlau, a senior fellow at the Competitive Enterprise Institute, recently said that repealing the Durbin Amendment could prevent retailers from charging consumers new credit card fees.
The Durbin Amendment, a provision of the 2010 Dodd-Frank Act that caps the amount a bank can charge a merchant to process a debit transaction, took effect just over one year ago. Retailers across the country urged Congress to institute the fee cap, resulting in an $8 billion annual windfall for merchants, though new data suggests that community banks, credit unions and banks have suffered as a result of the rule, NJ.com reports.
Banks saw significant revenue losses as a result of the provision and began charging fees in other areas, including checking, resulting in a decline in the number of free checking programs available to consumers. Only 39 percent of all banks offer free, non-interest checking, a six percent decrease from 45 percent in 2011.
The Durbin Amendment has cost some regional banks approximately one-third of their income. Community institutions exempt from the fee cap of the rule still have to comply with other provisions of the rule, including one that allows merchants to “route” transactions through a different bank’s network, functioning essentially as a price control.
“While competition is the American way, and it is always good for consumers to look around and see if they can get a better deal,” Berlau said, according to NJ.com. “There will likely be no escaping the deadweight loss of this government regulation. So if you like the new checking and ATM fees, you’re going to love the reductions in credit card rewards and the return of annual fees on your credit cards if retailers get their way in further shifting the cost of credit card processing to consumers. If, however, you don’t like new fees and you don’t like paying big retailers’ share of credit and debit card processing, push for repeal of the Durbin Amendment.”