By John Berlau -
Over the Memorial Day weekend, the Big Retail lobby created a dubious driving distraction.
The Merchants Payments Coalition, whose members include retail giants like Walmart and 7-Eleven, took out a Business Wire press release warning motorists to “Get Ready to Be Side-Swiped by Your Bank’s Exorbitant Credit-Card Fees.” In reality, it’s rent-seeking retailers and allied politicians who are rear-ending American consumers on Memorial Day and every day through the price controls they pushed for in Dodd-Frank’s Durbin Amendment. Now, they are lobbying Washington to ram ordinary folks even more with policies that will make security breaches like that of Target more likely to happen.
At issue are “interchange fees,” fees charged to merchants by credit and debit-card issuing banks and credit unions to process consumer transactions. Together with consumer payments, these fees finance the electronic payment infrastructure and technologies to fend of security threats. But ever since the Dodd-Frank financial “reform” was signed by President Obama in 2010, the retailers have begun a massive cost-shift that hits consumers in the wallet.
At the behest of big retailers such as Walmart and Illinois-based Walgreens, Senate Majority Whip Dick Durbin (D-IL) inserted into the Dodd-Frank financial “reform” of 2010 a measure that mandates that the debit card interchange fees charged to retailers must be “reasonable and proportional to the cost incurred by the issuer [bank or credit union issuing the card] with respect to the transaction.” Then, again at Big Retail’s behest, the Federal Reserve barred banks and credit unions from profiting on the fees charged to retailers, only a very limited portion of costs could actually be recovered in the fee.
The result has been both a humongous cost-shifting for debit card processing from retailers to consumers — a sharp reduction of free checking for low-balance account and the virtual end of debit card rewards — as well as much less resources from retailers to fight hacking and cyber attacks. George Mason University law professor Todd Zywicki, now a member of the Competitive Enterprise Institute’s board of directors, has found that the Durbin Amendment also bears much of the blame for more than 1 million consumers becoming unbanked over the past few years.