With 2018 right around the corner, it’s time to start making resolutions: to exercise more, to eat better, to spend more time with loved ones, or to practice better financial habits. Unfortunately, that last goal has become particularly difficult in recent years, as the federal government has implemented rules and regulations that increase costs and limit choices for American consumers. But there are several resolutions that Congress and the president can make at 2018’s outset to help consumers in the year ahead.
Resolving to address the damage caused by the Durbin Amendment, a particularly pernicious element of the Dodd-Frank Act of 2010, is a good place to start. This provision capped the debit card fees that banks charge retailers, known as “interchange fees.” Supporters of the Durbin Amendment claimed that this measure, by saving retailers money, would lead to lower prices. However, retailers have either maintained or increased prices, instead of passing interchange savings onto consumers. Meanwhile, banks lost a revenue source of about $14 billion annually — a loss they’ve tried to make up for by raising other fees and reducing free services.
In other words, a law that was supposed to help save consumers money has ended up costing them.
The House of Representatives had a golden opportunity to address this problem over the summer, when it voted on the Financial CHOICE Act. Although drafts of the bill included a repeal of the Durbin Amendment, this language was excluded from the version the House passed. Let’s hope the Senate takes the best interest of consumers into account and reinstitutes that provision.
The lifting of recent restrictions on prepaid cards would be another helpful resolution Congress and the president could make to help consumers. The origins of these regulations stem from the backlash against the Durbin Amendment, where banks sought to offset their losses by raising charges for checking and other accounts. In response to that unsurprising move by banks, consumers responded in kind and sought to avoid the increased fees by substituting costly bank accounts with prepaid card accounts.
In 2016, the Consumer Financial Protection Bureau imposed fee limitations on these (a euphemism for price controls), under the auspices of protecting consumers; however, that move made prepaid cards more like the banks that gave rise to increased consumer demand for the cards in the first place. The CFPB is currently reconsidering the rule, but without substantive changes, its implementation will mean fewer — and more expensive — prepaid card options.
The CFPB also hurt consumer choice by attacking small-dollar lending, a politically unpopular but critical industry. Businesses in this industry — which includes payday, installment, and automobile title lending — offer a valuable service to consumers who lack access to traditional financing options, providing about 72 million small-dollar loans over the last six years. But in October, the CFPB announced new rules that limit how much and how often consumers can borrow from these lenders. This rule will hurt the ability of America’s most financially vulnerable populations to access credit. Another helpful resolution to make on behalf of these consumers, then, would be for Congress to repeal this misguided rule.
If all of this seems like too much to ask, remember that Congress gave consumers an early Christmas present this year when it repealed another overly aggressive measure of the CFPB: the arbitration rule. Released in July, this measure would have prevented banks from requiring consumers to resolve disputes through arbitration rather than going to court. The idea of everyone having their day in court sounds good in theory, but the reality is plaintiffs would not be the primary beneficiaries of the resulting class-action litigation — their attorneys would be.
There’s reason to hope, then, that members of Congress and the president will resolve to help consumers in the new year by pushing back against regulations that drive up costs and restrict options.
Kyle Burgess is executive director of Consumers’ Research, the nation’s oldest consumer affairs organization.
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