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Washington
iWSJi editorial bashes interchange rule
WASHINGTON (3/18/11)--A Thursday editorial featured in the Wall Street Journal had biting words for the Dodd-Frank Act provisions instructing the Federal Reserve to “fix prices on debit cards,” and for the lawmakers who supported the price-fixing. The editorial explains that Dodd-Frank ordered the Fed to “fix prices” on what card issuers may charge merchants “each time they swipe a transaction” with a customer’s debit card. “Under the new Fed rule, which will take effect in April unless Congress acts to stop it, that fee will be capped at 12 cents per transaction, reducing the charges by some $12 billion to $14 billion and in effect transferring the cost of debit cards from the merchants who pay the fees to the consumers who use them,” the editorial said. It also took aim at merchants’ claims that they would pass savings from the lower debit cahrge interchange fees on to consumers as lower prices on merchandise. “While that is doubtful, the loss of that revenue will force debit card issuers to raise fees elsewhere to compensate,” the editorial charged. Just look at the 2009 credit card reforms, which are driving free checking to extinctions, and you can extrapolate what will happen with debit cards, it said. While acknowledging the “Durbin amendment,” so called because it was drafted by Sen. Richard Durbin (D-Ill.), included an exemption for small issuers with $10 billion of less in assets, the Wall Street Journal said it was meaningless: “(F)ew small (issuers) will be able to compete in a marketplace blanketed with the artificially lowered fees of larger institutions. The editorial also gave the amendment’s congressional supporters a hard poke. “Amended to Dodd-Frank at the last moment, the Durbin gambit avoided the scrutiny of hearings and passed the Senate 64-33.” The bi-partisan nature of the vote, with 17 Republicans included, “proves that ignorance is bipartisan.


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