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Backing the Big Banks Down - one small step for mankind.

By
Real Estate Agent with 1st Action Real Estate

In March of this year I wrote a short piece about the Durbin Amendment to the Dodd -Frank Wall Street Reform and Consumer Protection Act. I had the opportunity to trek back to Washington and testify on behalf of a business advocacy group I belong to about the deleterious impact of  excessive debit card charges (swipe fees) on small businesses across the country and the resulting impact on consumer prices. It was an uphill battle as banks were throwing over $100,000 a day into their lobbying effort to keep this from  being implemented. The loss to them from these fees is estimated at $50 Billion, with a B, a year.

Amazingly enough, consumer interests prevailed in spite of the dire warning from the big banks of repercussions to follow. If you're a business owner, you should have seen your debit card usage charges go down in July by as much as 70%.

But now the banks are following through on their pledge to develop 'other sources of revenue'. You've heard about the much vaunted ploy by B of A and others to institute a $3 or $5 / month 'fee' for using your debit card. Everybody from Sen. Durbin to Pres. Obama to the Occupy Wall Streeters and consumers across the country have criticized this new fee - with many consumers simply pulling up stakes and moving their accounts to smaller banks that don't pull this kind of stuff.

In response, Chase & Wells have decided to drop their plans to institute these charges after their limited market testing period run out next month. B of A has also apparently smelled the coffee and, short of saying they will not go forward with the plan, have at least announced they are reviewing the program. 

I have no doubt that these banks are losing money on some avenues of debit/credit card usage. However, the problem is largely of their own making. First of all, they claim those fees were used to off-set bad debt losses - after inviting nearly every breathing biped in the country to take one or more of their cards. In fact their invitations were not confined to breathing bipeds but to several deceased bipeds along with numerous quadrupeds like the family dog and cat. And they wonder why there are losses and claim it's our fault. 

Then  after making sure everybody was carrying one or more of their cards, they launched a major effort to get us to switch from credit to debit cards. They did this by offering numerous rewards and incentives which, prior to Durbin, were carried on the backs of businesses and indirectly passed on to consumers. 

Now they have decided this was not a good strategy after all and want us to again shoulder the cost of their mistakes. But people are standing up to them in unprecedented numbers - in fact some people are even camping out in parks in protest. Most of them don't know what they're protesting in a specific sense but in general this is exactly the kind of  banking shenanigans that is driving some of the protesters - at least those that are cognizant of real fiscal matters. 

So keep up the good work. Not just the Occupiers, but all you folks on main street. Sometimes standing in your window yelling 'I'm mad as hell and I'm not going to take it any more' gets the job done. Especially if enough of us do it. Together we can accomplish great things - like throwing a bunch of bums out of office next November - but only if we stay focused. 

Comments(8)

Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

This one goes to the good guys! Thank you for sharing your post. I have been blogging for many months about Dodd-Frank being such a ripe-off. As you know this bill was sold as in the interest of the consumer. This entire bill needs to re repealed!

Oct 31, 2011 06:28 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Until recently, I had no idea that vendors were charged by the banks when a customer used a debit card rather than a credit card.  I knew that credit card use created a 5-6% charge to the merchant/vendor.  I didn't think about a charge to the vendor/merchant when a customer opted to use their debit card.

Oct 31, 2011 06:39 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Dodd-Frank is a horrendously over-reaching bill that does more damage to the system than it corrects. Many unintended consequences. There may be one or two good ideas contained there-in, but when you get something this huge and this far reaching, you know there's gonna be problems. The other problem is - as much a friend as Barney Frank has been to real estate interests, he and Dodd were on the front lines getting us into this mess in the first place - now we're entrusting them to get us back out? Saints preserve us.

Oct 31, 2011 06:41 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Lenn, according to some of the folks I met in DC, including one guy who owns numerous 7/11 outlets on the east coast, due to marketing by the banks on the use of debit cards, as much as 80% of his traffic now pays for their purchases by debit card. The fees, prior to Durbin, averaged $.45 per transaction. He said if somebody comes in to buy a .99 cup of coffee or a USA Today or WSJ, he would actually lose less money to just give them the dang thing. There were over 200 separate categories that applied to different size businesses and purchases, and whether you used your debit card as a debit or credit card etc.

Unfortunately we as consumers will probably never see much savings from this as these (mostly) small businesses will simply pocket the difference, or hopefully use it to hire another person. Big businesses like Home Depot and WalMart used their size to leverage lower fees but the difference to them is in the millions of dollars saved every year. Again, we will probably never see those savings directly but maybe they'll hire a couple more people. I know ARCO gas in CA used to charge a $.45 surcharge for using your debit OR credit card and they've dropped that to $.35. I guess that's a small win.

Oct 31, 2011 06:55 AM
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Gene - Thanks for an interesting and enlightening read. There is a very worrisome practice in effect by all big financial institutions right now of passing the cost of their mistakes on to the consumer. It has been very apparent in the insurance industry, where the cost of risk used to based on actuarial models for specific risk pools, but is now being determined by the principal of maintaining an "acceptable" level of corporate profit. Same idea, different players, same mugging of consumers. Basically, they're turning us upside down and shaking us to see if by chance there might still be some loose change in our pockets.

Oct 31, 2011 07:12 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Very appropriate analogy Dick. That loose change is about all some of us have left after Obama. Don't think that was the kind of change he was hoping for. How are things in the Fort? I went to CSU and still have many good friends in the area. Great town.

Oct 31, 2011 10:40 AM
Broker Nick
South Florida Real Estate & Development, Inc. - Coconut Creek, FL
Broker Nick Relocation Broker Service

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Oct 31, 2011 01:49 PM
Dale Terry
Yadkinville, NC

The real reason that banks want to charge more is that they no longer can make massive profits trading.  That doesn't mean that they are denied the ability to trade, it is just that it isn't as profitable.  And many people are saving now, not spending.

Nov 01, 2011 12:31 PM