Today marks the one-year anniversary of the implementation of one of the most misguided pieces of banking legislation to come out of Washington in decades: the Durbin amendment. As Richard Hunt, head of the Consumer Bankers Association, points out below, the Durbin amendment is an example of old-fashioned price-fixing that, in this case, facilitates a transfer of wealth from an interest group that happens to be out of favor, the banks, to one that Sen. Durbin seems to approve of: the big-box retailers. And the supposed benefit to consumers that the amendment was supposed to provide? It has yet to materialize—as the CBA and other banking organizations predicted. As Hunt points out, the Durbin amendment hasn’t helped consumers a bit:
Richard Hunt: Durbin Amendment Anniversary
This week, as I waited to board my flight to Bloomington, I wondered about how ticket prices would be affected if Senator Durbin mandated price controls in the airline industry as he has with banks. Today, when you fly Durbin's Chicago-based United Airlines, you can expect to pay fees to go to the front of the line, use wifi, watch TV, have a snack, check an extra bag, get an aisle seat or change your flight. The airline sets the fees. Consumers choose to pay for the services they value. That’s the beauty of it. The market – the consumer – decides.
Monday marks the one year anniversary of the Durbin Amendment, which forced banks to take unprecedented measures to offset losses. In the past year, consumers have been the big losers. Only big box retailers have benefited.
The retail industry has a long history of opposing government intervention, including health care, minimum wage increases and most recently the New York prohibition on large sugary drinks. Lately, however, they have changed their tune to benefit their industry - suing the Fed and objecting to the interchange settlement which was eight years in the making. Instead of accepting the benefits of the $6 billion settlement and the $6.6 billion windfall from the Durbin Amendment, retailers want even more.
As we have seen with banking, price fixing has consequences. In fact, the Durbin Amendment backfired on 7-11 as they now pay more on the majority of their transactions than they did pre-Durbin. This legislation was a political handout to big-box retailers, who now are scrambling to make excuses for why they couldn’t pass savings along to customers.
Remember the promises the retailers made to American consumers and Congress? A year later, consumers are still waiting to see those savings.
There is only one thing left to do: repeal price controls. Repeal Durbin.
These are the must-read articles of the week on the one year anniversary of the Durbin Amendment and the interchange settlement: