By Rick Manning
Woke retailers like Target are lining up in support of what last year I called ‘smash and grab’ legislation worth billions of dollars by mandating changes to how credit cards are processed. Senator Dick Durbin succeeded in getting language put into the 2010 Dodd-Frank bill that imposed massive new regulations on the banking industry which changed the processing of debit card transactions. Guess who got and kept the windfall in lower processing fees? If you answered the big box retailers, you are right.
Why would anyone in the Senate jump on board legislation which would give uber-woke retailers like Target millions of dollars a month in free money? That’s the question Americans should be asking Senator Durbin who is expected to reintroduce his stale, failed legislation to give Big Box retailers a bigger cut on credit card swipe fees.
As always, Durbin and Target lobbyists promise that the savings in processing fees will find their way to the consumer. As the legendary British rock group The Who once sung, ‘we won’t be fooled again.’
In fact, a 2017 study by the International Center for Law and Economics (ICLE), found that big box stores like Target were the big winners from the Durbin debit card processing fees amendment, and main street stores along with lower income consumers were the losers.
And a previous 2014 analysis by ICLE also found that “although the Durbin Amendment had generated benefits for large box retailers, it had harmed many other merchants, especially those specializing in small-ticket items, and imposed substantial net costs on the majority of consumers, especially those from lower-income households.”
The 2017 ICLE study also found “… that the passage of time has not ameliorated the harm to bank customers from the Durbin Amendment; to the contrary, earlier adverse trends have solidified or worsened. Nor do we find any indication that matters have improved for small merchants or retail consumers: Although large merchants continue to reap a Durbin Amendment windfall, there remains no evidence that small merchants have realized any cost savings — indeed, many have suffered cost increases. Nor is there any evidence that merchants have lowered prices for retail consumers; for many small-ticket items, in fact, prices have been driven up. Finally, we identify a new trend that was not apparent when we examined the data three years ago: Contrary to our findings then, the two-tier system of interchange fee regulation (which exempts issuing banks with under $10 billion in assets) no longer appears to be protecting smaller banks from the Durbin Amendment’s adverse effects.”
Shocker. The 2010 Durbin amendment benefitted Durbin’s big retailer donors and harmed small businesses.
What’s more, the study finds that bank consumers with low balances endured higher bank fees in order to offset the losses suffered by the banks increasing the number of unbanked Americans. Effectively, Durbin’s last venture into the transfer fee arena created the perverse effect that the poorest consumers suffered a funds transfer into the largest and wealthiest big box stores.
Now, you know why Durbin is desperately seeking a GOP Senator to co-sponsor his recycled credit card transfer fee legislation. It is also why he is looking in the ranks of the newly elected Republican freshman class, like Ohio’s J.D. Vance, for someone who doesn’t realize that this idea has been tried and has failed.
It is easy to understand why Illinois’ Dick Durbin would want to fill the pockets of woke retailers like Target with unearned cash, what is impossible to fathom is why any GOP Senator would join him.
Rick Manning is the President of Americans for Limited Government.
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