If Dick Durbin Did it, It’s a Problem

December/13/2011 19:38PM
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Senator Durbin, from the broke state of Illinois, home of President Obama, has caused another problem.

Durbin has never seen a tax he didn’t like. Never passed an opportunity to pass a new restrictive government regulation. Always votes in favor of bigger government. And, has never been concerned once about a budget over-run. Spending is his thing. Passing out goodies from the government for staying in office.

Durbin has smiled into camera after camera and taken full credit for eliminating debit card fees as part of the Dodd-Frank Act. When banks tried to offset that loss by putting a monthly fee on debit cards, Durbin was front and center trashing the banks. The banks withdrew those fees.

But, as always, a government action always has unintended consequences. Banks used to give merchants discounts on small transactions. Now those small transaction costs have jumped from 6 to 7 cents a transaction to the Durbin cap of 21 cents. This is wreaking havoc on merchants who sell small value transactions, like vending machines and coffee shops. These small transaction merchants are screaming. Durbin isn’t commenting. These merchants are faced with putting in ATM machines or going to discount for cash. They work on razor thin margins, their products are price sensitive, and they can’t eat 15 a transaction cost increase.

Thanks, Dick Durbin. You took $6 billion from the banks, hoped it would pass through to the consumer, and got great visibility for the Durbin Act. Now companies like Dairy Queen and Red Box are paying the price. They must raise prices.

Someday, hopefully soon, someone will do a study to see if any merchant in the country who benefited from the Durbin Act really lowered the price to offset the elimination of the higher swipe fees. My guess, the Drubin Act passed through bank income to merchants and added cost to small transaction merchants.

Consumers get zero benefit and actually lose on the deal if they make small purchases on debit cards.

Thanks, Dick.

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