Capping Debit Card Fees Could Hurt Consumers

Randy Smith: Capping debit card fees could hurt consumers

BY RANDY SMITH • PUBLISHED: MAY 27. 2011 2:00AM

It’s easy to look at the debate over debit card fees and think it’s a no brainer. The big bad Wall Street bankers are back to getting bonuses most of us can’t even comprehend. It makes sense that what we pay for our debit card transactions should be lowered. Or does it?

The Durbin Amendment to lower debit card interchange fees was rushed through without proper analysis on the true effect to all financial institutions and consumers. It is a blanket amendment that will force community credit unions and banks to raise fees to survive.

Credit Unions are community based. Look around Greenville at all the credit unions and their daily impact on the community. Credit unions are owned by their members. Credit unions are supporters of their members, local businesses, charities, schools, hospitals, police, firefighters and the military. Almost anyone in Greenville can join a credit union.

Nationwide there are 93 million members of cooperative financial institutions, credit unions. In 2010 members saved $6.5 billion by using a credit union instead of a bank. That is money that stays in the community. On average credit unions receive 44 cents for each debit card transaction. The new proposal would cap it at 12 cents. This does not even begin to cover the cost to support the system and protect against fraud. There are estimates that two out of every three community financial institutions would lose money on their debit card program.

Remember, credit unions are member-owned. That means more fees and less saving for the people of Greenville. The big Wall Street banks will make it up on volume. The community financial institutions will have to make it up in other ways.

It’s not just those who work in the credit union community who see the glaring flaws in the Durbin Amendment. In recent weeks concern and doubt have been expressed by Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair. Sen. Jon Tester (D, Mont.) and Rep. Shelley Moore Capito, R-W.Va., have introduced legislation to delay the Fed’s implementation of the interchange regulation. Joining in the call for delay and asking to further study of the true effect on moderate- and low-income consumers is the National Education Association, National Community Reinvestment Coalition, NAACP and the Hispanic Chamber of Commerce.

Contact Sen. Jim DeMint, Sen. Lindsey Graham and Rep. Trey Gowdy and tell them to leave our debit cards alone. Ask them to take a closer look at how this is good for the people of South Carolina.

http://www.greenvilleonline.com/article/20110527/OPINION/305270008/Don-t-cap-debit-fees