Hold on to your wallet: The Durbin Amendment goes into effect Saturday. The once-obscure amendment to the Dodd-Frank financial-reform bill limits “interchange fees,” which banks charge to merchants for providing the service that allows stores to accept debit-card payments. The fees were cut by some 80 percent, which makes it less profitable for banks to offer debit-card services. So the banks have done the natural thing and begun to transfer the fee from merchants to their customers, with Bank of America announcing a new $5-per-month fee for debit-card users.
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Naturally, the amendment’s author, Sen. Dick Durbin (D., Ill.) is in a rage, complaining that the banks are “sticking it” to consumers. He ought not be surprised: What is happening is precisely what was predicted by industry experts and by the banks themselves. Running a debit-card network costs money, and banks are not going to do it for free or suffer reduced profits gladly. As is usually the case, what we have here is one special-interest lobby (retailers) using its political clout to prevail over a marketplace rival (the banks) to secure for itself a bigger piece of the action. Mr. Durbin, being a senator and a Democrat, cannot resist the urge to stick his nose into controversies better left to the marketplace. Not coincidentally, one of the nation’s largest retailers, Walgreens, is located in his state, and the firm’s CEO lobbied hard for the new federal price controls on debit-card fees.
The new fees are a textbook example of the unintended consequences of regulation — unintended, yes, but not unforeseeable.
Indeed, they were almost universally foreseen. In the Michigan state legislature — hardly a hotbed of free-market fundamentalism — a resolution calling for abandoning the Durbin amendment was passed unanimously by both houses. Sen. Darwin Booher, who sponsored the Michigan resolution, said at the time: “I sponsored this resolution to send a strong message to Congress: Stop any rules from being adopted that would harm our community banks, credit unions, and the millions of Michigan consumers that use them. As currently proposed, the rules would force credit unions and community banks to absorb the costs of fraud and data security. That would result in less credit available for job providers, increased fees, and the ending of popular services like free checking.”
Free checking accounts were the first casualty, with almost every major bank in the country restricting that popular option to larger accounts and imposing new fees on customers who keep lower balances. Again, Bank of America was the first mover, a position it was impelled to take in no small part by the fact that the new regulation forced it to suffer a $10 billion writedown of future earnings. “I’ve seen more regulation in last 30 months than in last 30 years,” Robert Hammer, a banking expert, told the Associated Press. “The bottom line for banks is shifting enormously, swiftly and deeply, and they’re not going to sit by twiddling their thumbs. They’re going to change.” Unintended, not unforeseeable.
Dodd-Frank is a bad piece of legislation, and the Durbin Amendment may not even be the worst part of it. But when Americans start seeing those $5 monthly fees on their bank statements (and if you get a paper bank statement, expect a fee for that, too), we should thank Senator Durbin, who did it all to save us money.
What's the big deal? I can only assume that I'll save more than $5/month due to the fact that retailers can lower their prices since they don't need to pay the fees.
Mitch, please inform us all when you find a retailer who reduced its prices because of this regulation. And many people have debit/ATM cards but don't use and now they will pay 5 bucks anyway.
As a retailer, I can tell you that a smaller merchant fee doesn’t mean I lower my prices. It means I pay a smaller bill and keep the savings. Nonetheless, a retailer does not live in a vacuum. Assume for a moment that Bank of America isn’t just throwing a political temper tantrum, and that most banks follow suit by eliminating free checking. Most people use a debit card, and assuming they continue to use one after it costs $5 a month, they will have five dollars less to spend on goods and non-banking services every month. My savings from the smaller merchant fee just disappeared. This whole thing is an idiotic exercise in redundancy, and a perfect example of the masturbatory thought process that occurs in the mind of an economically illiterate left-winger. Consumers have been paying for debit cards all along. Nothing will change except for where the expense shows up under the green eye shade.
My credit union does not charge fee's like this. My credit union offers 20 dollars rebate per month on foreign bank atm fee's.
The initial investment to the banking industry for debit card processing was realized years ago. Their ongoing cost is nothing but maintenance fee's for hardware.
They reduced cost's by reducing personnel. Just try doing bank with a teller, when you can find one.
Sorry, banks get cut rate loans with almost zero interest. Banks give terrible rates for deposits, when this money is used by them to make profits. Banks charge outrageous rates for credit cards and loans. And banks now are charging outrageous amounts for the use of a persons own money.
There are enough credit unions and small banks to absorb what these mega banks are going to lose by this practice.
I hope to see Bank Of America go bankrupt for their actions. Not by acts of congress, but by loss of business. And the American people will not allow for another bail out for these banks and their bad business models. Remember, a good business model is to keep your customers happy and still make a profit. Customers are not happy and will leave, thus the loss of that profit.
We don't need these banks, and the loss of their customers will soon prove that.
Yes. The bankster's business model has changed. Now that they've consolidated through mergers, a very few banks control almost everything. Along the way, they were made to give loans first to people who couldn't pay them back. Well, they're greedy, not stupid, so their model is now to charge a fee on any and everything, and lend to noone, using their less than 1 percent Magic Fed money to play the markets. No need to collect, just zap it out of your account.
For instance, now some banks charge you for paying on uncollected funds (funds which have already been deposited. It doesn't matter if it's from a fortune 500 company), possibly three times, at $40 per pop. Even for a $3 check. Why is it uncollected? Because the anti-terrorism stupidity* freezes a deposit for up to two weeks. So, if you don't have operating capital for at least two weeks on hand, you're going to be inundated with these charges. With businesses hanging on by their teeth, and banks not lending, who do you think is going to hire anybody or plan an expansion? Alas, only Solyndra. With our money.
Can Al Quaeda please do us all a favor and nuke Chicago? Otherwise, Obama, Durbin, and the Chicago mob will be the death of us all.
*Wow! You can't say the other word that starts with C and ends in P, and includes R and A?
What sissys.
Unless it's a new account, deposits under $5K are made available within 2 business days nearly all the time. Most banks actually offer more than $5K next day availability for good customers particularly small business and commercial customers.
Nearly all check deposits under $5K are made available within 2 business days by regulation. Most banks offer better policies than what the regulations require. In particular, small business and commercial accounts typically have much higher limits for next day availability on deposits.
Can you possibly be serious, Dan? Lefties always tell us the wonderful things their harebrained policies are going to do for us, then scream like babies when the utterably foreseeable consequences arise.
The free market is designed to keep profits from being a gouge. That is why we don't look kindly on trusts - you know, like the ones the government runs with schools, which perform miserably and cost exorbitantly. Unless you are a stockholder, the profit of a private business is none of your business - and if they ARE gouging, competitors in a free economy will undercut them right quickly. Your only legitimate response is to do business elsewhere, where the gouging isn't being done. In this case, you will have to change banks frequently in the next year, because the numbers involved demand they increase fees. The only ones doing serious gouging in this country are government, community organizers and their sycophants (that would be you, Dan.)
This country's economy can't stand much more of this administration. To paraphrase your beloved president, that's not partisanship; it's math.
Ignore Dan. He knows absolutely nothing about banking, its costs, its profit models, etc.
don't be too upset with him. He's on par with the Congressmen, Senators and President who crafted this legislation and forced it on the American people.
As you see all these new fees added to your bills over the next year or so, just remember the source of all the new expenses - and let your wallet cast your vote!
Dan, I want you to think for a minute about all of the money that you have lost to debit card fraud from your bank account. Now I don't know you from Adam, but I would bet that the number is 0. But believe it or not there have been hundreds of thousands of dollars lost from debit card fraud, losses that have been absorbed by the banks, losses that were funded by the interchange fees that are so derided by you and Mr. Durbin. What is really ironic, is that most of the security breaches that compromised the debit card and pin numbers essential to the perpetration of this form of fraud, occured within a merchants management information system. Now you can delude yourself into thinking that you will not be effected since you rely on a small credit union, but the interchange mechanism cannot be supported by small credit unions alone. You lament the demise of the bank teller in favor of the ATM, but most customers value time, and their debit card and PIN are sufficient identification to make their transaction quick and timely.
A final thought, why do merchants accept debit cards if the fees are so onerous? Simply put, the cost of the transactions are less than the alternatives. Electronic payments accrue immediately in the merchants account. Electronic payments cannot be pilfered by checkout clerks or disgruntled retail managers. Electronic payments do not need to be totaled and transported to a bank for deposit. Electronic payments eliminate the float factor.
You have no understanding of economics, markets, banking, or punctuation. Banks are failing right and left and those that aren't are not lending money. Credit is the oil for the engine of our economy; credit unions can take care of a grain of sand like you but they don't make large corporate loans and most don't make small business loans. Those that have tried have failed because they don't understand anything about commercial lending. Remember, too, that credit unions are not for profit and serve only their membership and no one else. Oh, yes . . . they are also a cooperative. Socialism doesn't work across the rest of the economy. I can assure you that credit unions are a woefully inadequate substitute for a banking system.
I live in Northeast and my bank charged $5.00 per month on my son's savings account for " inactivity ." My son is trying to SAVE money for college and here the bank is taking it away because there's no activity on the account!!
I immediately closed the account, and will research other banks, or credit unions that will honor a SAVINGS account.
