Sen. Dick Durbin: Destroyer of Affordable Debit Cards (Guest Post)

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Perhaps you’ve heard your grandparents tell stories about how they got a shiny new toaster every time they opened a new bank account. Freebies were a common marketing technique for banks to get new customers in the door. Eventually, toaster and clock radio giveaways were pushed to the side for something more valuable: free checking, increased interest rates, and bank card rewards points. However, all of these great bank perks came to an end in 2010 as the Durbin Amendment to the Dodd-Frank Act was signed into law.

The Durbin Amendment was presented as a consumer protection law. In theory, retailers had been forced to raise their prices to compensate for the much-needed interchange security fees banks began charging to process debit cards. Of course, special interest groups lobbying for big-box retailers like Target, Walmart, Walgreens and Home Depot were not happy with the rate increase. They began lobbying Washington to artificially rig the rates downwards, and they quickly found a willing collaborator in Sen. Durbin.

Durbin created an amendment that required the Federal Reserve to limit the fees banks were allowed to charge for debit card processing. In return for a 50% reduction in fees, retailers promised that this change would allow them to lower prices on consumers.

However, typical of the crony capitalism that runs rampant through Washington, the Durbin Amendment did not result in lower prices for consumers at all. Instead, it shuffled billions in dollars of wealth from consumers to large retailers. Since the law took effect in October of 2011, retailers have enjoyed an extra $8 billion of profit each and every year, while consumers have yet to see a penny of the $40 billion in savings that was promised to them.

Higher retail prices on consumers aren’t the only effect of Sen. Durbin’s Amendment. Running a safe, instantaneous, globally-connected payment system has cost the banking industry a great deal of money, and the mandatory reduction in interchange fees has certainly not helped to lower processing fees on the millions of debit card transactions each year. Early estimates showed that the banks would come up short every year by $6.6 billion to $8.5 billion. However, with the explosion of cybercrime and e-payment fraud, banks have incurred even more expenses than expected, raising the cost of debit card processing to $14 million annually.

Now that the Federal Reserve has put a cap on the fees retailers pay, the banking industry has to recoup the $14 million in processing from someone. Of course, that $14 million payment has fallen squarely on the shoulders of the American consumer. Gone are the free checking accounts for all but the wealthiest customers. Interest rates on savings accounts have plummeted to the point that banks feel comfortable bragging about shelling out 0.75 percent.

Sen. Durbin’s amendment essentially created a situation where the consumer is getting hit from both sides, all while his cronies rake in an extra $40 billion. Without question, the amendment needs to be repealed immediately. Thankfully, Rep. Randy Neugebauer (R-Texas) and Rep. Jeb Hensarling (R-Texas) have committed to do just that with their bill, the Financial Choice Act.

The Financial Choice Act will remove the ineffective government price caps, giving banks the ability to recoup the money they spend on processing and fraud protection. Banking services will finally become affordable and available to the average and low-income consumer again.

Congress needs to pass Rep. Neugebauer and Rep. Hensarling’s bill to restore healthy competition and protect the American consumer. This piece of legislation is needed now more than ever, and the Republican-controlled Congress needs to act on it today while it still can.

Drew Armstrong is a 2015 graduate of California State University in Fullerton and a contributor at Red Alert Politics. He currently resides in Orange County, California.

11 Responses to “Sen. Dick Durbin: Destroyer of Affordable Debit Cards (Guest Post)”

  1. 2

    Spurwing Plover

    A see three intellecual eggheads in Texas tried to block the Campus carry law the judge refused their stupid demands and the brain-dead dumber then a sack of rocks students were marching around in puke orange T-Shirts read GUN FREE UT and carrying stupid signs with stupid anti-gun slogans on them

  2. 3

    Artfldgr

    Anyone other than myself remember that when they gave toasters the interest rates were around 12% not under 3%? and that the consumer may pay more in product costs, but they sure save more than that in housing and loans for cars… so its kind of a wash unless you focus on one thing and ignore the rest.

    oh, and no, the bankers are not bragging, they are actually not making much money because they make money on interest rates most of all, not other fees and things (comparatively)

    this is why everyone is waiting for friday and the monthly scare the stock market, shift to the bonds, or visa versa when Yellen starts musing outloud and no one can tell what her intent is post musing

  3. 4

    Spurwing Plover

    I read that one bank once gave away shot guns to the first 100 now accounts they gave away all the guns while someone once offered a free turkey for each gun turned in they gave away only three turkeys

  4. 5

    Artfldgr

    @Spurwing Plover: carrying stupid signs with stupid anti-gun slogans on them

    Ask them what happened w Charles Whitman (who turned out to have a brain tumor), and who was Allen Crum…

    Armed citizen saves officer who was being attacked
    https://www.youtube.com/watch?v=bYDmUswqmbQ

    Armed Citizen Saves People at Grocery Store
    https://www.youtube.com/watch?v=sdEKsNUc2kQ

    Mom Asks 911 For Permission To Shoot Intruder – Actual Call
    https://www.youtube.com/watch?v=bp5gAY6aIjA

    Georgia Mom Shoots Intruder 5 times! (911 Call) home invasion
    https://www.youtube.com/watch?v=PYl6vrzza78
    (he just got back from training his wife at a gun range)

    you can find dozens of reports of women, and lots of children, protecting themselves and family… i wonder what these young adults at college would think if they watched about two dozen of these reports and were asked about it… after all, in all the cases above, and more, you had armed people entering homes, attacking in stores, and even on the street… if you look hard enough you can even find incidents and tapes of sherrifs deputizing citizens with a gun to help them… (i remember one case that was on tv where the officer (i think texas) is trying to block a road, someone drives up, the officer asks if they know how to use a gun, they say yes, he says your deputized and the man and him blocked exit..

  5. 8

    another vet

    DICK Durbin is a left wing, troop trashing, anti-Constitution, arrogant elitist. Unfortunately the lefties here in the People’s Republic of Illinois who make up the majority of voters (hence the reason the state is so hosed up) keep electing him so don’t plan on him going anywhere any time soon.

  6. 9

    Nanny G

    @Artfldgr:
    I remember it, Art.
    I also remember going to the supermarket (on my bicycle with little basket) with $10 and buying everything for three dinners one week, then going back a few days later and the same $10 only bought two of those same dinners!
    Carter’s Misery Index was pretty high back then.

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