Write on a chalk board 1,000 times: Price controls on credit lead to . . . less credit.

Debit Card Debacle


Under current rules, every time a customer uses a debit card in a store, the issuing bank charges the merchant a small transaction fee, which represents a percentage of the sale. 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.

Merchants argue that if they don't have to pay as much per transaction, they will pass along the savings in lower prices. While that is doubtful, the loss of that revenue will force debit card issuers to raise fees elsewhere to compensate.

Congress's 2009 effort to regulate credit cards shows what will happen. Do you like free checking? Enjoy it while you can, because unless you're a high roller you will soon be paying for check-writing privileges. The price controls have also caused banks to deny credit to marginal borrowers—i.e., those with low incomes. Many have been forced out of the formal banking system and into the arms of payday lenders (if they're lucky) and loan sharks (if they're not). Mr. Durbin should have called his amendment the Payday Lender Empowerment Act.

Amended to Dodd-Frank at the last moment, the Durbin gambit avoided the scrutiny of hearings and passed the Senate 64-33. Seventeen Republicans went along for this ride, which proves that ignorance is bipartisan.

Comment: The law of unintended consequences ... which congress regularly ignores

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