Campaign for Liberty to Congress: Repeal anti-consumer, pro-crony legislation

Campaign for Liberty has joined an "open letter" to Chairman of the House Financial Services Committee Jeb Hensarling requesting repeal of the "Durbin Amendment." This amendment, named after its sponsor Illinois Senator Dick Durbin, and part of the Dodd-Frank bill, limits "interchange fees," which are the fees banks and credit unions charge businesses for processing credit card transactions.

Sounds boring? It's ok you can admit it. I hear you yawing. Or are you asking yourself: "Who cares about a fight between big retailers and big banks?" Well you should care since the costs of these price controls are born by consumers who are faced with fewer services and/or higher fees from their financial institutions.

Opponents of crony capitalism should also care as the Durbin Amendment is a typical case of politicians doing favors for corporate interests and disguising it as "pro-consumer."

Campaign for Liberty members should call their Representatives and ask their support in repealing the Durbin Amendment.

February 7, 2017

An Open Letter to House Financial Services: Repeal the Durbin Amendment Dear Chairman Hensarling,

On behalf of the undersigned free market organizations and taxpayer advocates, we write to urge you to maintain the provision that repeals the Federal Reserve’s price fixing for interchange fees from debit card purchases—also known as the “Durbin Amendment”—in the Financial CHOICE Act moving forward.

The federal government should never be in the business of price-setting, a function better performed by the market. The Financial CHOICE Act seeks to undo some of the Dodd-Frank Act’s most damaging regulations, and repealing the Durbin Amendment must remain a high priority.

We know the debate over the Durbin Amendment pits retailers against debit card issuers. But we think one should not focus on choosing between interested parties, but focus on principle: it is the market, not the Federal Reserve or any other bureaucracy , which should set the price of a service. Government intervention would only be justified in the case of collusion amongst network platforms, a matter, in any such event, for the courts. Durbin Amendment advocates, of course, claim the regulation aids consumers by lowering retail prices.

Their reasoning runs something like this: if stores are able to pay less to accept debit cards, this savings will be passed on to consumers. But a 2014 study by George Mason University found the promised price drop never materialized. Meanwhile, as banks were forced to accept less than market rates for debit interchange fees, margins shrank, forcing a reduction in benefits for bank customers. In the aftermath of Durbin Amendment passage, consumers saw a reduction in free checking offerings and debit card reward offerings.

In sum, in contrast to the promises, the Durbin Amendment has come at the expense of consumers rather than helping them, just as we would expect when bureaucracy replaces competition. The burdensome costs of the Durbin Amendment, like so many other ill-conceived regulations born of Dodd-Frank, have become fully clear with the passage of time.

This gives the 115th Congress a crucial opportunity to enact reform of the plethora of antimarket regulations promulgated over the last eight years and move forward with progrowth policies. We therefore urge you to keep the provision repealing the Durbin Amendment in the new version of the bill.