This month, a new Congress is being sworn in and a new president will be inaugurated. As with any turnover in Washington, D.C., there will be new ideas and policy shifts, but this transition from one administration to another doesn't have to be acrimonious.
As Republicans and Democrats come together to strengthen our nation's economy and fix broken policies, they should look no further than repealing the so-called Durbin Amendment to the Consumer Financial Protection Act of 2010. This ill-conceived provision to regulate debit-interchange fees has led to negative consequences for consumers, low- to moderate-income bank customers and small community financial institutions. It has strong bipartisan opposition in both houses of Congress.
In 2010 this provision, which set price controls on debit-card transactions, was slipped into the Consumer Financial Protection Act in the dead of night under the guise of making electronic payments more affordable for merchants who promised that they would pass the savings onto consumers. Putting aside that the Durbin Amendment is the antithesis of a free market principle, the measure and the big-box retailers who supported it have never lived up to its promise.
Consumers were bamboozled. They have, in fact, seen no savings from this legislation, while corporate retailers have pocketed an additional $8 billion a year in windfall profits. That adds up to $42 billion since this legislation has been enacted.
Ask yourself: In the last several years has the cost of your everyday goods gone down? If not, you're not alone, as surveys show most Americans don't feel they have saved money. If you don't believe your own math, just ask retailers who have admitted in those same surveys that not only has the cost of goods not decreased, but in many cases retailers have raised prices.
While large retailers have seen enormous profits thanks to this legislation, banks now have less flexibility to offer incentives like debit-rewards programs and free checking for their members. This has hit low- to moderate-income customers the hardest, many of whom rely on free checking to keep their bank accounts open. Rewards programs that give people some extra cash sometimes can go a long way for those who don't have a lot.
Ironically, the haste of Congress in passing this legislation has led to negative consequences for small merchants as well. Prior to the enactment of the Durbin Amendment, interchange fees were negotiable.
But government intrusion into this process has set a floor as well as ceiling for these fees, meaning that some mom and pop stores are paying more for these transactions now than they did before the law was drafted.
When this provision was first introduced, many in Congress on both sides of the aisle, including former House Financial Services Chairman Barney Frank, knew that this was a mistake. But the retailers' lofty promises of savings for consumers won the day.
In 2012, the chorus of opposition grew louder, yet supporters of the Durbin Amendment kept stalling.
It is now 2017 and this is what we all know: Big-box retailers have pocketed billions through a government giveaway scheme, savings are not being passed on to the consumer, low- to moderate-income families are losing much-needed financial incentives, and small merchants are being used as pawns.
There will be many disagreements between the two parties in the days ahead, but this doesn't need to be one of them. The Durbin Amendment simply does not work and everyday Americans are worse off for it. There has always been the will in Congress to address the issue; I hope that in the 115th Congress there will also be the votes.