Sen. Dick Durbin: Destroyer of Affordable Debit Cards (Guest Post)

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Flopping Aces : Sen. Dick Durbin: Destroyer of Affordable Debit Cards (Guest Post)

By Drew Armstrong 6 Comments

 

Tue, Aug, 23rd, 201

6

Perhaps you’ve heard your grandparents tell stories about how they got a shiny new toaster every time they opened a new bank account. Freebies were a common marketing technique for banks to get new customers in the door. Eventually, toaster and clock radio giveaways were pushed to the side for something more valuable: free checking, increased interest rates, and bank card rewards points. However, all of these great bank perks came to an end in 2010 as the Durbin Amendment to the Dodd-Frank Act was signed into law.

 

The Durbin Amendment was presented as a consumer protection law. In theory, retailers had been forced to raise their prices to compensate for the much-needed interchange security fees banks began charging to process debit cards. Of course, special interest groups lobbying for big-box retailers like Target, Walmart, Walgreens and Home Depot were not happy with the rate increase. They began lobbying Washington to artificially rig the rates downwards, and they quickly found a willing collaborator in Sen. Durbin.

 

Durbin created an amendment that required the Federal Reserve to limit the fees banks were allowed to charge for debit card processing.