“Ding dong the witch is dead, the wicked witch is dead!”
Yes, those are the lyrics to part of the song the Munchkins sing in the “Wizard of Oz” when the wicked witch melted after Dorothy threw a bucket of water on her.
It may not be as dramatic, but Federal Reserve Board Chairman Ben Bernanke’s letters to Congress this week informing them the Federal Reserve would not meet the April 21 deadline for issuing final debit card interchange and network regulations, was the symbolic bucket of water putting an end to the Durbin Amendment. Bernanke still insists the Federal Reserve will meet the July 21 deadline for implementing the rules that will regulate the fee that can be charged for interchange.
It is unclear what the delay will ultimately mean, but we can only applaud the “cooling off” period. It will give Congress more time to study this piece of legislation, and we hope, in the end, Congress will realize this is not good for anyone.
To put it in simple terms, if this bill is enacted, Big Box Retailers will be the winners, and the losers will be consumers. Because of their high volume of credit and debit card sales, Big Box Retailers can weather any change to interchange. But banks, who generate revenue from interchange, will suffer a loss of revenue, as some already have. To make up for that loss, banks are beginning to charge consumers “maintenance” fees that are tied to certain accounts. To avoid paying the fee the customer would need to keep a certain balance in the account. Banks have also started doing away with free checking. Card networks have also started taking away debit card perks.
To us, the Durbin Amendment is the Wicked Witch of the West. And while merchants stated they’d pass along any savings they saw from the decrease in the interchange fees, we don’t suspect there is any truth to those rumors. We suspect merchants, especially the Big Box Retailers, would pocket any savings as either profit, or use it to defray the costs of other expenses.
In the end, the consumer was going to be left holding the bag. Here’s hoping the witch is gone for good, and that she’s taken her army of winged monkeys with her.