On May 4, the House Financial Services Committee advanced The Financial CHOICE Act, a bill by Chairman Jeb Hensarling (R-TX), which eliminates price fixing and repeals anti-consumer measures in Dodd-Frank. The legislation eliminates the Durbin Amendment, which has saved big retailers nearly $42 billion since its passage in 2010, with little savings to consumers. Hensarling’s bill is a step in the right direction to protect American consumers and small businesses from higher prices and onerous government regulations.
Senate Majority Whip Dick Durbin (D-IL), who introduced the amendment just after the height of the financial crisis in 2010, boasted in an official Senate statement that his bill would give “customers a real chance in the fight against the outrageously high ‘swipe fees’ charged by Visa and MasterCard.”
“By requiring debit card fees to be reasonable, and by cleaning up Visa’s and MasterCard’s worst abuses, small businesses and their customers will be able to keep more of their own money,” Durbin continued, before claiming that his legislation would “restore common sense and fairness to this broken system.”
In the seven years since the amendment’s passage, Durbin’s pet project has wreaked havoc on the American consumer. According to a study by George Mason University, retail prices did not drop after the Durbin Amendment was introduced; instead, it has cost low-income and minority consumers $1-3 billion annually in additional fees.
The Durbin Amendment imposed government price controls on “interchange fees,” which are the fees banks charge retailers for debit and credit card transactions. His amendment was backed by large retail lobbyists, who profited from the reduced retail fees at the expense of banks. After Dodd Frank’s passage, banks passed those costs along to consumers by raising ATM fees, penalties, and more.
According to the Federal Reserve, “few merchants” reduced prices, while a “sizable fraction” increased prices or eliminated the use of debit cards altogether. Since Durbin’s amendment was signed into law, it has caused over 1 million mostly low-income Americans to lose access to free bank accounts and has increased the costs of other banking and financial services. Durbin’s power grab on the American consumer was based on nothing but lies, and has hurt the very people it was designed to help.
Rep. Ted Budd (R-NC) spoke on the House floor last week to slam the Durbin Amendment as a “violation of a core free-market principle,” arguing “government should not be telling people what they can or can’t charge.” Budd, a member of the House Financial Services Committee, told members, “there’s six to eight billion dollars per year at play here,” before warning members that “a vote to keep the Durbin Amendment is a vote that rests on the idea that members are sure that there is price fixing in the debit card market.”
Rep. Jeb Hensarling’s Financial CHOICE Act is a critical step to restoring the free market system to the benefit of consumers, and makes good on President Trump’s promise to the American people to dismantle this anti-consumer law.