Friday, May 27, 2011

Debit card controversy shows silliness of professional lobbying; but there is no reason for Congress to meddle

What about all the lobbying messages on TV urging consumers to pressure their representatives not to pass the proposed caps on debit card fees.

It’s all very complicated stuff, that could benefit some kinds of merchants at the expense of everyone else, so “on dit”. 

Nerd Wallet (eg. “Nerd Herd” from Chuck, maybe) has a detailed explanation  (“The Durbin Amendment Explained”) with charts (website url) here.  But going through it takes up and down through seeming financial contradictions.  The bottom line is that consumers don’t want to pay for the convenience of using cards and not carrying cash, but they will have to. (I like Nerd's slogan, "We do the homework for you." So do I.)

Another crowd argues that banks will set up a frictionless inter-party payment system that could drive services like PayPal out of business, link (wesbite url) here.

There are a lot of short, hysterical postings on the web about S 585 (from the 111th Congress), without a lot of substance, which shows the problems when debate is turned over to “professional” lobbyists. 

Deroy Mudock, a libertarian-leaning syndicated columnist in conservative publications, however, gave a more lucid explanation of what's wrong in the Washington Times on May 27, here.  Banks fee will be limited to a flat fee on any sized purchase; merchants will tend to pocket the profits, and banks will have every incentive to gouge consumers in other areas, like free checking. This sounds to me like an area where Congress doesn't need to meddle. 

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