Rarely is there such a clear cut example of the futility of government regulation than this week’s news on debit card fees. You may remember that as part of last year’s financial regulatory overhaul, Democrats decided to protect consumers from fees by limiting the amount of money that banks could charge for swiping debit cards when making retail purchases. Today, the New York Times reports:
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Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee.
The round of new charges stems from a rule, which takes effect on Saturday, that limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, is a crucial part of the Dodd-Frank financial overhaul law.
The article also quotes JP Mogan Chase CEO Jamie Dimon as saying, “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.”
This debit fees example should be used in economic textbooks to teach students about how the ability of businesses to shift costs means that regulatory costs get passed on to the consumer.
