“DON’T bail out the big banks on Wall Street another time,” thundered Richard Durbin, an American senator, “Once in a political lifetime is enough!” His amendment to the Dodd-Frank financial reform of 2010 capped the fees banks can charge merchants to process debit-card transactions, on the grounds that banks were gouging businesses and their customers. But the limits on “interchange fees”, as the financial jargon has it, have not worked out as planned. They have resulted, by one calculation, in the transfer of between $1 billion and $3 billion annually from poor households to big retailers and their shareholders. These were not the beneficiaries Mr Durbin had in mind when the amendment came into effect three years ago this week.
Stores accept cards to increase their sales. Both the bank that issues the card and the one that handles the retailer’s account charge them a small fee for the privilege, as does the card network—an arrangement often criticised as opaque and anti-competitive. American banks, Mr Durbin claimed, took in more than $1 billion a month from such fees. The rules implementing his amendment capped interchange fees for most transactions at 21 cents plus 0.05% of the sum charged—a 45% cut. Retailers, Mr Durbin assumed, would pass the resulting savings to consumers.