Consumers wallets hit by payday cash debit card amendment

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Wed, 2010-06-30 08:43

Anonymous

Consumers wallets hit by payday cash debit card amendment

Former White House Press Secretary and current Fox News commentator Dana Perino warns consumers that there's trouble brewing in Congress. This trouble could make debit card purchases substantially more costly. To be clear, it will really affect almost all consumer purchases and debit card interchange fees could be the cause, claims Perino.

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Courtesy of an unheralded amendment to the financial reform law as it is being pushed by Illinois Senator Dick Durbin, the Federal Reserve would take control of money now debit card interchange rates. As Dana Perino says they're, an interchange rate is "money that a retailer's bank pays your bank whenever you use your credit or debit card at their store." This money is a valuable resource to many of the smaller financial institutions; without interchange rates, it would be difficult for these smaller banks to offer basic services to their customers.

If the Federal Reserve were to cut off the income stream, smaller banks would have no choice but to pass on the cost to customers. In many of these cases, this would drive them to larger, more impersonal banks that won't have as much competition and can charge more for credit services. Consumers who balk at this could have to rely on cash, checks or cash until payday loan secured loans for their transactions, which offer no insurance on the back end within the event of fraud.

Dick Durbin's amendment sullies advances in financial reform

Consumers have the pictures painted for them by Dana Perino also. Imagine what retailers will do if debit card transactions cost them more. Of course they'll pass the cost on to customers. Some retailers do this already, but with Dick Durbin's financial reform law amendment, it would become commonplace. In addition, no-fee checking would more than likely disappear, along with various rewards programs as banks look to make up for income lost after the Durbin amendment.

Price controls do not work

Price controls of this nature have not found much success, historically. The blog Wizbang uses the example of gas prices in Hawaii. Australian legislation from 2003 is an example. At that time, retailers began to charge extra for consumers paying with plastic, and the trend has continued. What Perino is wondering is how something like the Dick Durbin amendment can sneak in without much attention, and will these consumers have to depend upon fast cash secured loans with no credit check a lot more often.

More info on this topic

Fox News

foxnews.com/opinion/2010/06/04/dana-perino-dick-durbin-senate-amendment-federal-reserve/

Wizbang

wizbangblog.com/content/2006/05/08/why-price-controls-dont-work.php

Wed, 2010-06-30 09:50

Mangone

I’d say that more expensive debit card charges are likely to be the least of your future financial concerns, Helena. Although the linked article is UK orientated it essentially applies to the whole Western banking system and most probably the world banking system. “…More-or-less the whole eurozone banking sector - including big German and French banks - is under the dark shadow cast by their huge holdings of eurozone government bonds, because of deep-seated fears that Greece and perhaps other overstretched eurozone states will eventually default on their sizeable debts. But it would be quite wrong to see the welfare dependency of banks as a purely eurozone phenomenon. At the peak of the financial crisis in late 2008, public-sector support for the worlds' banks - in the form of loans, guarantees, insurance and investment - was equivalent to a quarter of everything the world produces, or more than $12trillion. This was the biggest co-ordinated financial rescue operation the world had ever seen. But to avoid a permanent fusing of the balance sheets of banks and the balance sheets of sovereign states, all that emergency financial support has to be unwound. “ “…wherever you look in the rich West, from the US to the eurozone, banks are currently borrowing substantially less on debt markets than they require simply to replace their maturing debts. It has all the hallmarks of a second credit crunch.” http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/06/the_risks_o...

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