Reduced debit fees will solve nothing


Following is a quote by Senator Dick Durbin (D) Illinios, supporting his Amendment to the Dodd-Frank Wall Street Reform Act of 2010:

“The biggest banks in America — the top 1 percent of banks in America — are the ones that do almost 60 percent of this card business. I am talking about the same Wall Street banks that ended up getting a bailout from the federal government, to the tune of hundreds of billions of dollars.

“I do not have a lot of sympathy for them,” he said. “From my point of view, we should not be subsidizing them or creating an opportunity for them to fix prices when it comes to merchants and retailers across America.”

I have read dozens of similar quotes. What I haven’t read is any analysis that Senator Durbin has done on the profitability of these transactions, the costs or risks to the banks who process them or any understanding (or even awareness) of the macroeconomic principals that will inevitably lead to higher prices for a multitude of banking services for millions of the customers of the very banks he seeks to punish.

Senator Durbin’s assessment reminds me of a problem from my freshman Logic class.

  1. Bob Smith is a man
  2. Bob Smith is a thief
  3. All men are thieves

It scares me to think about members of Congress allowing anger and resentment to govern their legislation, and essentially our country. Punitive punishments have no place in law. If Senator Durbin wanted to do something for the American taxpayer, he should have started, along with his Congressional colleagues, by demanding that the TARP money they so quickly approved be distributed back to the taxpayers who provided it. Instead, they were allowed to horde the money, propping up their balance sheets for Wall Street while millions were forced into foreclosure, bankruptcy or both.

An NOW Congress steps in?

What Senator Durbin proposes by way of fee reductions on debit transactions will simply be made up (as has already been clearly seen) with these same banks charging higher fees on standard checking accounts, ATM transactions and the elimination of benefits to low balance customers. In other words, higher fees to those who can least afford it… again.

Jeff Foster

Founder and CEO

Cardplatforms, LLC - Payventures, LLC