Sen. Richard Durbin is not going away quietly, and neither is the amendment he authored in the Dodd-Frank Financial Reform bill.
Last week, Durbin responded to a letter from the American Bankers Association to Congress reiterating its desire for Congress to hold an observation period before allowing Durbin’s Amendment, which would cap interchange fees at 12 cents, to become law in July.
In his reply, Durbin argued the ABA is merely using the “observation period” as a smoke screen and that it really doesn’t want to see the rate at which interchange is calculated changed.
The ABA argues that capping the fee at 12 cents would cause harm to consumers and banks. In a letter to Durbin, Frank Keating, president of the ABA, noted that Home Depot’s CEO recently stated it would save $35 million if the interchange was capped at 12 cents, but that the CEO never stated the consumers would see those savings. Wal*mart and other large big box retailers also anticipate significant million dollars in savings from this bill.
We ask, if those savings aren’t passed on to the consumer, is it really a case of “more savings, more doing?”
The fact remains, and supported by research and the results from the Australian interchange experiment, that consumers will not see any savings that merchants make from a cap on interchange. Consumers are already starting to absorb more banking fees and less perks. To make up for expected revenue losses, Bank of America and Citizens’ Bank have already put in place programs that charge maintenance fees on certain savings accounts, require those account holder to maintain a minimum balance (upward of $1,500) and have taken away free checking.
We forecast this last summer when President Obama passed the bill. And we continue to stand firm that this is not the right thing for the government to do.
As we started to emerge from the country’s worst recession in decades, consumers started to spend money they had been holding onto, and we all know how little there is in extra cash lying around in people’s wallets these days. For consumers to be told, keep $1,500 in your bank account or get hit with a $25 monthly fee is a miscarriage of justice.
Other banks are taking away perks associated with debit cards. At what cost will consumers bear to use their old money.
The Durbin Amendment as it is written today is wrong and doesn’t “fix” anything. It’s wrong for the country, wrong for banks, wrong for merchants,(except big box retailers), and most of all wrong for consumers, who won’t see any meaningful savings passed along to them, but will see an increase in fees, a decrease in loyalty programs and potentially less access to credit.
Here’s a banking tip. If you have an extra $1,500 lying around, go out and buy a good mattress and box spring and then put all your money between them, rather than in the bank. There won’t be any fees when you peel back the sheets to get money for a night out.