The editorial “Side-swiped” (March 24) defends U.S. Sen. Dick Durbin’s amendment that put price controls on what banks and credit unions can charge retailers for processing debit cards and claimed that “nobody is arguing against the right for banks to make a reasonable profit.”
The amendment, passed last year as part of the Dodd-Frank financial overhaul, outlaws profits that banks and credit unions can make from merchant interchange fees, and it forces them to price the fees below the cost of maintaining the debit card payment system. The Federal Reserve said the measure, which will go into effect soon unless Congress intervenes, “prohibits the Board from considering … costs that are not specific to a particular transaction.”
Processing debit cards is not cheap, especially given today’s electronic threats, including cyber attacks. If banks and credit unions can’t recover their costs from retailers, those costs will be shifted to consumers through the loss of free checking and more fees.
And consumers probably won’t reap any benefits of retailers’ windfall. Congress’ Government Accountability Office found that since Australia pushed through similar fee caps in 2003, there has been no “conclusive evidence of … lower retail prices.”