Something for the 99% to Protest

To: Wal-Mart From: The Durbin Amendment

I have sympathy and empathy for the 99% and some of their arguments.  The banking industry has done plenty of things that warrant scrutiny and correction, to put it mildly.  I am not a spokesperson or lackey for Bank of America, but…

I don’t understand why the 99%ers haven’t figured out that Wal-Mart’s lobbying prowess (and that of other retailers) is the reason that BofA is going to charge them $5 per month for their debit cards.  Under the Durbin Amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act, interchange fees (the fee paid by a retailer to process a debit card transaction) has been cut by about half.  Since someone has to pay for this elaborate and extensive (and efficient) electronic network that moves all this money, BofA and other banks pushed the charges onto the next logical customer–consumers who lack lobbying power.  What else would you expect the bank to do?  They’re not running a charity; they have shareholders to answer to.  Retail customers have less firepower than Wal-Mart and its cohorts, so Wal-Mart wins in front of Congress and retail bank customers lose.

Under the law, Wal-Mart’s fees paid to BofA and others falls by millions of dollars (the aggregate impact on banks processing debit card transactions is estimated at $14 billion per year!).  That’s money directly into the wallets of the retailers, who I’m sure are quietly sniggering in the background over this issue.  This is a direct transfer from the pockets of customers into the pockets of retailers, plain and simple.

And yet I see no protesters in front of Wal-Mart (whom I’m picking on here only because they’re the largest retailer and processor of debit card transactions–others gain as well).  No “Occupy Congress” movement.

I wish that the understanding of banking and how banks work was more sophisticated than what people picked up watching “It’s A Wonderful Life”.  A man can dream, can’t he?

Here’s an explanation of the Durbin Amendment from Wikipedia:

The “Durbin Amendment” is a provision in the final bill aimed at debit card interchange fees and increasing competition in payment processing. The provision was not in the House bill;it began as an amendment to the Senate bill from Dick Durbin and led to lobbying against it.The law applies to banks with over $10 billion in assets, and these banks would have to charge debit card interchange fees that are “reasonable and proportional to the actual cost” of processing the transaction. The bill aimed to restrict anti-competitive practices and encourage competition, and included provisions which allow retailers to refuse to use cards for small purchases and offer incentives for using cash or another type of card.

The Durbin Amendment also gave the Federal Reserve the power to regulate debit card interchange fees, and on December 16, 2010 the Fed proposed a maximum interchange fee of 12 cents per debit card transaction,which CardHub.com estimated would cost large banks $14 billion annually.On June 29, 2011, the Fed issued its final rule, which holds that the maximum interchange fee an issuer can receive from a single debit card transaction is 21 cents plus 5 basis points multiplied by the amount of the transaction.This rule also allows issuers to raise their interchange fees by as much as one cent if they implement certain fraud-prevention measures.An issuer eligible for this adjustment, could therefore receive an interchange fee of as much as 24 cents for the average debit card transaction (valued at $38),according to the Federal Reserve. This cap — which will take effect on October 1, 2011 rather than July 21, 2011 as was previously announced — will reduce fees roughly $9.4 billion annually, according to CardHub.com.As a result of the government limiting their revenue from interchange fees, banks made plans to raise account maintenance fees to compensate.


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