Thursday, April 28, 2011

The Ugliest Fight in DC: Debit Card Fees

Zach Carter has a huge report on the DC debit fee battle. But if you don't have time to read it, Yves Smith's summary will provide you with a sense for what is going down:
...the reason this battle is so hard fought is that it pits two big spending constituencies against each other: banks versus retailers, or as one Senator broke it down further:

The big greedy bastards against the big greedy bastards; the big greedy bastards against the little greedy bastards; and some cases even the other little greedy bastards against the other little greedy bastards...
The Carter story is full of juicy vignettes: Bernanke lying badly on behalf of banks; WalMart fabricating alarmist Fed statistics; various Congressmen handwringing as to which group they should sell themselves to align with; the repeated flip flops of the mercenary NAACP
The regulation of debit card fees is DC gone mad. This is as far from free enterprise as you can get. It is two elitist groups fighting for a government edge. Retailers do seem to make a point that debit card fees are over the top, but I suspect the real problem behind the high fees is that Master Card and Visa have gamed the system so that lower priced competitors are prevented from providing competing services. So what we have here is here is layer upon layer of special interest fighting.

1 comment:

  1. A couple thoughts:
    -I think it's sketchy to assume that a reduction in interchange fees paid by merchants will be passed along to consumers.
    -Interchange revenue is a major driver of checking benefits, so expect to see (more) maintenance and service fees and reduction or elimination of rewards. (we've already seen major banks do this in anticipation of the legislation.)