Regulatory reform, that will benefit consumers and spur economic growth, will be the priority of the House Financial Service Committee, says its Chairman, Rep. Jeb Hensarling (R-TX). One of the highest priorities is the repeal of the Durbin Amendment, which will bring about more choices in banking for consumers, that could move forward next week in the committee. The Durbin Amendment, enacted as part of the Dodd-Frank financial regulations law signed by President Barack Obama in 2010, put in place restrictions on the “interchange fee” charged to retailers for processing payments via credit and debit cards.
By freeing the banks of this regulation, Congress will allow them to offer more choices of financial services to consumers, including free checking services that were, before Dodd-Frank, far more common than they are now. Most major banks offered free checking in 2010, while six year later, only 39 percent of banks offer checking accounts without regular monthly fees. The increased cost of business incurred by the enacting of the Durbin Amendment was inevitably passed along to consumers. Right after Dodd-Frank was signed into law, several major banks responded shortly after by charging monthly fees of five dollars of more on basic checking accounts that had been previously offered without monthly fees. By passing legislation to repeal the measure, Congress can free consumers of the cost of this regulatory burden.
By lowering the fees charged to retailers on debit and credit card transactions, sponsored of the Durbin Amendment believed it would lead to retailers passing the savings along to consumers. But no such benefit was ever enjoyed by retail consumers. Retailers, BusinessWire reported, have pocket an estimated $36 million in savings from the lower interchange fee revenues over the last six years. The retailers pushed for lower fees, and pocketed the money, and consumers didn’t benefit from the Durbin Amendment.
Major retailers have found great benefit in making sales to consumers due to the convenience of using their debit and credit cards for most purchases. The growth in use of the debit and credit cards has provided great convenience to consumers as well as facilitating higher sales and revenues for retailers. The small per dollar interchange fee paid by retailers to process these transactions has allowed a growing consumer economy that has been a huge boon for retailers.
Earlier this year, Rep. Randy Neugebauer had introduced legislation to the House Financial Services Committee, H.R. 5465, to repeal section 1075 of Dodd-Frank, commonly known as the Durbin Amendment. The proposal could be moving forward next week.
Rep. Hensarling has promised his committee will take up a strong pro-consumer regulatory reform agenda, including repealing the Durbin Amendment. It would be of great benefit to consumers, and the American economy, if the House Financial Services Committee advances the legislation next week to repeal this burdensome regulation on financial services that has brought no tangible benefit to consumers.
The free market is most effective at setting prices for products and services in a way that benefits consumers the most. Just about every attempt to have government bureaucrats set them instead has failed. The Durbin Amendment has been no different. It will be of great benefit for consumers and the economy if Congress moves next week to enact the repeal legislation.