Following the passage of the “Durbin Amendment” to the Dodd-Frank financial regulation bill — an amendment which cut the fees that debit card providers can charge merchants per transaction — Bank of America created a furor by announcing a $5 per month debit card fee.
Following an outcry from customers, including a Facebook-based call for “Bank Transfer Day” asking Americans to switch their bank accounts to accounts at credit unions by the end of this week, and with other banks either refusing to go along with debit card fees or canceling similar plans, Bank of America has announced it will not be proceeding with this particular fee.
To be sure, the Durbin Amendment has cost banks a couple of billion dollars, basically transferring those profits to retailers like WalMart (who were the major lobbyists for the legislation.) It’s the business equivalent of asking a sports fan facing a players’ strike whether he has more sympathy for the owners or the players; the usual answer — and my answer — is “neither.” The main reason to appreciate lower debit card fees is that they may allow retailers to lower prices; the main reason to oppose the current situation is that it was created by the unconstitutional and unwise insertion of a politician’s desires into a very competitive marketplace.
But there’s a broader point to be made: The wailing and gnashing of teeth that followed Bank of America’s ham-handed reaction to Durbin morphed, in part, into a wider rhetorical assault on capitalism. The Occupy Wall Street movement (which organizers of Bank Transfer Day explicitly distance themselves from) is calling for “more regulation including dictating what all banks can charge.”
Do you think any Occupy-er will admit or even recognize that capitalism — which is to say competition within the very competitive banking industry — took care of the debit card fee? To be sure, banks will still try to recover some of the revenue lost to Durbin, but even there competition will limit their latitude to extract fees from customers.
If I may offer my first-ever compliment of the Occupy movement, it is that their web page on the issue of debit card fees and bank regulation offers an honest description of the capitalist (which they call the Tea Party) take on the issue:
Tea Party believes Govt has no business getting involved. If a customer wants to pay, they can. If not, they can do business elsewhere. There’s no need to demonize the bank…just choose another bank and move on with your life. If the bank hopes to compete, it will lower its rates or fail and go out of business.
True, some banks may be fearing that a government intrusive enough to meddle in debit card pricing once is intrusive enough to try to do so again. But the key lesson of today’s actions by Bank of America and recent actions by other banks which had been considering similar debit card fees is that the capitalist/Tea Party view is right — or at least that the banks themselves believe it is. Again, I don’t imagine we’ll see one Occupy-er give credit (or debit?) where credit is due.
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