By aggressively limiting the fees banks can collect, retailers win and poorer Americans will pay
When Congress voted to change debit card rules last year, the effort was promoted as a way to put more money in Americans' pockets. It would crack down on big banks' excessive profits, said its proponents. The new swipe rule is set to take effect on Saturday, and the result is looking quite different. Those banks are just charging consumers directly now though higher checking account fees, and retailers are pocketing the savings intended for their customers.
An article by Josh Boak at Politico details this unfortunate, but wholly predictable, result. It reports that debit card fees collected by banks will decline from an average of 44 to 24 cents per transaction -- by about 45%. The proponents of this change said that this savings should flow from retailers (who collect the fees on behalf of banks) to consumers through lower prices.
Unfortunately, that doesn't appear to be happening. Politico reports that retailers aren't changing their prices in preparation for the fee cut:
"Companies are exploring it," said Mallory Duncan, senior vice president and general counsel for the National Retail Federation. "They're not lowering prices before the benefits of the law kick in."
The article continues by explaining that we have little reason to believe that these retailers will suddenly cut prices, even after Saturday:
Many stores are starved for revenue. Sales nationwide were at a standstill in August, according to a recent Commerce Department report. And Best Buy, Target and other national chains have warned that continuing high unemployment will pinch their revenues.
At a time like this, will retailers really look at a $7.2 billion windfall thanks to this new rule and just pass that cash onto its customers? Their "exploring" will probably find that these additional revenues will help their weak profits and that consumers will barely notice the change if they cut prices. And let's face it: if they really intended to cut prices in response to the change, then they could have fairly accurately estimated their potential savings without waiting for the fee cut to go into effect.