Fed finds (again!) that Durbin Amendment hurts consumers

The Federal Reserve Board of Governors recently released a report called "The Impact of Price Controls in Two-sided Markets: Evidence from US Debit Card Interchange Fee Regulation." That dense title is one that few consumers-or even policy wonks-will put on their August reading lists.

They should. It proves, yet again, that lawmakers like House Financial Services Committee Chairman Jeb Hensarling (R-Texas), Reps. Blaine Luetkemeyer (R-Mo.), and Ted Budd (R-N.C.) and others were right: the Durbin amendment, shoved into the 2010 Dodd-Frank bill at the last minute by politicians doing the bidding of merchants like Walmart, is the reason that American consumers are paying more to bank.

There are now at least a dozen studies that conclude consumers are worse off because of Durbin. Meanwhile, we've yet to see one that relies on data produced post-Durbin to prove the policy's consumer benefits.

The recent Federal Reserve report, which was written by Mark Manuszak and Krzysztof Wozniak, confirms that, with Durbin, consumers are less likely to enjoy free checking accounts. In fact, they're about half as likely. Today, approximately 30 percent of consumers don't pay for this important service. Manuszak and Wozniak estimate that, if the Durbin amendment had never been passed, that number would be much higher. Nearly two-thirds of consumers would have access to free checking. This loss hit consumers regardless of whether their financial institution is subject to the Durbin amendment price controls or not. The Fed paper found consumers who bank at institutions exempt from the caps also are now far less likely to have access to free checking accounts than they would be had the price controls never been implemented.

Read more at The Hill