Durbin Amendment hurts those it intended to help

Dick DurbinConsumers, small retailers and credit unions, the intended winners of the Durbin Amendment, are now the ones feeling the negative impact of government-controlled prices, according to a financial expert.

Supporters of the rule claimed that a cap on the fees collected by banks and debit card issuers would ultimately save consumers money, reports. Todd Zywicki, a professor at George Mason University, said that customers have been paying more for their banks services since banks were forced implement new fees in order to recoup lost revenue.

“Free checking requirements rose substantially, and a la carte costs – for check cashing, replacement debit cards and so on – shot up,” Zywicki said, reports.

Zywicki said that low-income consumers have been hurt the most. The majority of the new fees are being paid by low-income customers. Customers with high incomes are able to avoid the new bank fees by meeting balance requirements or by having credit cards, mortgages or retirement accounts with banks.

The network exclusivity provision in the Durbin Amendment has caused concern among credit unions. The rule requires that all debit cards must be routed to at least two networks starting April. Credit union representatives fear they will not be able to support two systems.

“In the long run, most economists agree that this two-tier pricing system won’t work,” Zywicki said, according to

Card issuers decided they were unable to continue providing a discounted interchange rate for small-ticket items. As a result, merchants who sell low cost products are now being forced to pay even more in interchange fees since the enactment of the Durbin Amendment.

“Those who lobbied for government-controlled prices are waking up,” Zywicki said, reports.“Big-box retailers like Wal-Mart and Home Depot might have seen a gain, but everyone else saw their prices rise.”

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