In recent months consumers have begun to see the effects of Dodd-Frank on their ability to find and use credit in their everyday lives. Credit companies, who have invested billions in building credit networks that both retailers and consumers both benefit from using, have seen their ability to charge fees for using these networks slashed under new rules created under Dodd-Frank. While their is undoubtedly a role for government to play to ensure that these companies don’t charge over-burdensome fees, in this case their efforts may have gone too far.
In an letter recently published in the Cleveland Plain Dealer, I discuss the effect of the new swipe fee limits on consumers and credit companies. I argue that while the laws aim to protect consumers, they are really filling the pockets of big retail companies, who benefit from the easy access to credit that banks provide.
My letter, “Retailers’ push to limit bank fees for debit-card acceptance will cost consumers dearly,” was originally published in the Cleveland Plain Dealer and is reprinted below. It can also be found online at: http://blog.cleveland.com/letters/2011/07/retailers_push_to_limit_bank_f.html
Teresa Dixon Murray’s article sums up well what many experts predicted will happen with the Federal Reserve’s decision to impose even more limits on fees that retailers pay for accepting debit cards (“Consumers will pay more bank fees, get fewer loans under Dodd-Frank,” July 23). Legislators ignoring the legitimate concern of some banks about the loss of these fees also ignore the reality of the situation.
Credit card companies and banks invested heavily in the development and maintenance of the credit and debit networks that retailers choose to participate in. The Government Accountability Office has found that raising fees will decrease benefits available to consumers, such as rewards programs, and result in higher interest rates without cutting prices for consumers at all.
On balance, the decision to cap these fees will hurt consumers while lining the pockets of big retail companies; it is not surprising that some retailers want the limits placed even lower.
Matthew Glans, Chicago
Glans is the Midwest director of the Center on Finance, Insurance and Real Estate at The Heartland Institute.