Congress should stand for consumers and repeal the Durbin Amendment

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At your first rodeo, you might miss a lot of what is happening because you don’t know what to look for. I represented Georgia in Congress for 12 years. Unfortunately, because I saw that rodeo up close, I often saw the same thing over and over—something that newcomers might miss.

Members of Congress, representing their favorite special interests, draft legislation for those special interests and then sell it to the public as somehow being in the “public interest.” They turn the issue into something quite different than what it is in reality.

{mosads}It can play out like this: One interest group seeks help from their friends in Congress because they want the law changed so that they can pay less for a product they need. So they invent an issue, claim that the product is priced excessively by the other industry or group, and propose that regulations or price controls are needed to force the other side to stop “gouging” consumers on this product. What is actually a battle between competing special interests is framed as an issue of consumer protection, when no consumers are ultimately protected from anything as a result of the legislation.


Here’s a concrete example: the Durbin Amendment, enacted in 2010 as part of the Dodd-Frank financial legislation. There’s a thing called an “interchange fee,” which is a fee to cover the cost of purchases by customers using debit cards, instead of cash or checks. It is usually around three percent of a purchase. The fact that people love to use debit cards because they are easier than writing checks has increased sales for retailers.

But big box retailers didn’t want to pay market rate for processing debit card transactions—they wanted a discount. So they blasted “the banks” for charging interchange rates that were “too high,” demanding that Congress do something about it and claiming changes would help consumers. Retailers claimed that, once government got involved and forced lower rates, the savings would be passed along to consumers. But you and I both know how what happens. Government-set price controls never work.

Unfortunately, Congress bowed to the special interests and passed the Durbin Amendment, putting government price controls on interchange fees charged by banks. As a result of the amendment, retailers have saved an estimated $36 billion (yes, that’s billion with a “b”) in these fees, none of which has been passed along to consumers. Big Box retailers pocketed the savings and consumers enjoyed no benefit from this government price control scheme.

While retailers made more money by not passing along savings, banks didn’t lose any money in the process. We know that government regulations lead to additional fees—just look at fees on airline tickets, the fees on your bank account and ATM transactions, or the “environmental recovery fees” you pay when you get new tires. When regulations increase costs, those costs are simply passed along to consumers. If the Durbin Amendment cost banks anything, those appeared on your bank account statements and you paid them. We as the consumers lost twice.

Government price controls are contrary to everything I believe about the involvement of government in private industry. If I were still in Congress, I would introduce legislation to set a price control on Jeeps just to illustrate how silly it is to get Congress to set price controls on a product, because it doesn’t solve any problems. Price controls never work and only make the situation far worse. While proponents claim that price controls benefit consumers to get votes for the legislation, price controls simply don’t benefit consumers.

Thankfully, Republicans in Congress have a solution to this craziness that promotes the free market—this isn’t their first rodeo and they know what to do. Congressman Jeb Hensarling from Texas is working to fix the problems caused by Dodd-Frank, including the Durbin Amendment. From my time in Congress, I know Jeb. I know what’s in his heart and I know he will stand strong for the principles on which this nation was founded. No matter how much money or lobbyists or advertising or threats the representatives of the retail industry throw at him, he will stand strong for consumers and for freedom. That is what true leaders do—they stand strong and stay true to their principles despite pressure from special interests. 

This ain’t my first rodeo, and I can tell you that capitalism and free markets collapse when members of Congress like Dick Durbin, Nancy Pelosi, Barney Frank, and Chris Dodd make the rules. Price controls never work, and only serve to benefit their well-connected friends at the expense of most consumers. I’m glad members like Jeb are working hard to protect all of us from this government interference by repealing the Durbin Amendment.

Lynn Westmoreland (@Westmoreland_GA) served in the U.S. House as a Georgia Republican from 2005-17.

The views expressed by contributors are their own and are not the views of The Hill.

Tags Dick Durbin Dick Durbin Durbin Amendment Lynn Westmoreland
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