Bank of America Decision Doesn’t Negate Dodd-Frank’s Consumer Costs

Washington, D.C., November 2, 2011—Think Bank of America and other banks’ decision to drop debit card fees is a victory for consumers? Not so fast, says John Berlau, director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute.

“Bank of America dropping this specific fee doesn’t negate the many massive costs of Dodd-Frank and the Durbin Amendment to consumers,” Berlau says. He points out that banks have already imposed fees on previously free checking accounts as well as eliminated debit card rewards. Much of the debit card fees could simply be tucked into new checking fees.

Berlau points out that the shortfall in revenue to banks and credit unions from the Durbin Amendment’s price controls, which cap the fees that banks can charge retailers like Wal-Mart and Home Depot to about 21 cents per transaction, will continue to translate into increased costs for consumers. “The costs of debit card processing — from computer equipment to fighting fraud and identity theft — don’t simply vanish with the wave of Congress’ hand,” he says. “If it is mandated that retailers pay less of these costs, then consumers will almost automatically pay more. Competition can overcome a lot of things, but not the dead-weight loss of government mandates.”

Berlau concludes that “more important than the much-hyped Bank Transfer Day, would seem to be Bad Policy Transfer Day.” To bring this about, he recommends that consumers send CEI’s Durbin Dollars to politicians to “bill” politicians for these fees and push for repeal of the Durbin price controls that are causing them.

>> Read John Berlau’s OpenMarket blog post on the Bank of America decision here.