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Support Delaying Debit Card Price Controls, S. 575/H.R. 1081

Support Delaying Debit Card Price Controls, S. 575/H.R. 1081

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Published by: Ldoren9625 on Apr 05, 2011
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10/07/2014

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April 1, 2011RE: Support Delaying Debit Card Price Controls, S. 575/H.R. 1081Dear Member of Congress,We the undersigned organizations and individuals – together representing millions of Americans – urge your support of S. 575 and H.R. 1081 or any effortto delay and further study burdensome price controls on debit card transactions.As groups committed to free-market principles and property rights – andstrongly opposed to price controls – we believe these regulations will profoundly alter the market for debit cards by imposing enormous costs on consumers andforcing smaller banks and card issuers to eliminate services or exit the marketaltogether.The Federal Reserve, authorized under Section 1075 (the Durbin Amendment)of the ill-conceived Dodd-Frank financial reform act, is poised to cap theinterchange fee paid by merchants for debit card transactions at 12 cents – anover 70 percent drop from current average levels. Such draconian price controlswill inevitably push the cost of utilizing debit cards onto consumers and cardissuers.Consumers and seniors on fixed incomes will likely bear the brunt of theseregulations directly, as card issuers struggle to cover the cost of artificially low price controls on interchange fees. For card holders, this means higher fees,fewer card rewards, the elimination of banking services such as “free checking,”or otherwise. Simultaneously, banks – and particularly smaller card issuers – willbe forced to determine whether offering some consumer services is more costly than it is worthwhile. As is the outcome with all price controls, the Fed’simplementation of Section 1075 rules would reduce debit card offerings, severely dampening a burgeoning and highly convenient service for consumers.The Fed has interpreted the Durbin Amendment to mean that card issuers can’teven price services to cover their fixed and even variable costs. For this reason,New York University law professor Richard Epstein contends that these pricecontrols likely violate both the Due Process and Takings Clauses of the5
th
Amendment, as they require banks and credit unions to abide by explicitly below-cost price controls and deprive them of their property rights to a returnon capital invested.After Section 1075 was hastily inserted into the Dodd-Frank Act with little timefor review, S. 575/H.R. 1081 takes the responsible step of further studying theimpact of such regulations before they are implemented. Already, theGovernment Accountability Office found that when similar transaction fee capswere enacted in Australia, the cost was passed onto consumers in the form of reduced rewards and higher annual fees for payment card holders. Contrary to
 
Page 2the rhetoric of price control proponents, none of the savings merchants receivedin Australia were passed onto consumers.We urge you to support S. 575 and H.R. 1081, sponsored by Senators Jon Tester(D-MT), Bob Corker (R-TN), and Pat Toomey (R-PA) and Reps. Shelley MooreCapito (R-WV) and Debbie Wasserman Shultz (D-FL), to put a much neededtime-out on interchange fee price controls. These regulations are likely todevastate consumers and card issuers. We believe at the very least they warrant asignificant delay and an in-depth review.Sincerely,Grover NorquistPresidentAmericans for Tax ReformJohn BerlauDirector, Center for Investors &EntrepreneursCompetitive Enterprise InstituteJames MartinChairman60 Plus AssociationCarrie LukasExecutive DirectorIndependent Women’s ForumJames V DeLong VP & Senior AnalystConvergence Law InstituteKelsey Zahourek Executive DirectorProperty Rights AllianceEli Lehrer*Vice PresidentThe Heartland InstituteChuck MuthPresidentCitizen OutreachChris ChocolaPresidentClub for GrowthSeton Motley PresidentLess GovernmentKaren KerriganPresident & CEOSmall Business & EntrepreneurshipCouncilColin A. HannaPresidentLet Freedom Ring Tim LeeVice President, Legal & PublicAffairsCenter for Individual FreedomClarke R. WiseLegislative CoordinatorCNP Action, Inc.Duane PardePresidentNational Taxpayers UnionJim BacklinVice President, Legislative AffairsChristian Coalition of America

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