Dan Riehl
Riehl World View
6/8/2010
Via Big Government, at the behest of lobbyists, Senate [sic] Dick Durbin has introduced an amendment to the financial reform bill, one which will ultimately punish consumers, while benefiting companies like BP and Wal-Mart. I wonder if Wal-Mart traded this for their support on government health care?
The Durbin amendment imposes a price control scheme on the fees oil companies and retailers pay when they accept payment by credit cards. The amendment was conceived and pushed for by lobbyists for big oil companies and big retailers like BP and Wal-Mart. Their goal is simple — shift the costs of accepting credit cards from their bottom line to the consumers.
More details from George Mason University law professor and Mercatus Center scholar Todd J. Zywicki writing in the Washington Times. One result could be an increase in retailers mandating their own proprietary credit vehicles, which often come with some of the largest interest and fee schedules. Democrats really just want to protect the little guy, unfortunately, the little guy can’t afford to buy them lunch at swanky DC bistros, while lobbyists can.
But the provision that exposes the Durbin amendment as a merchant-driven money grab at the expense of consumers is that which permits merchants to override network rules on maximum charge levels. The only apparent rationale for this provision is to enable merchants to steer purchases of bigger-ticket items to their in-house or proprietary credit plans, thereby giving merchants an effective monopoly for those credit sales. Consumers won’t benefit from restricted competition and reduced credit choice, especially when financing more expensive purchases.
The purpose of the financial reform bill purportedly is to prevent another financial crisis from happening. Price controls on debit cards, much less prepaid cards such as gift cards, have nothing to do with that goal. But they have much to do with a powerful special-interest group seizing the anti-bank mood in the country to ram through new mandates that will allow them to impose their business costs on consumers. Maybe next they’ll try to persuade Congress to outlaw free parking and friendly cashiers in order to reduce business costs.
