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Swipe Fee Cap Distorts the Marketplace

| American Banker

The more things change, the more they stay the same.

The National Association of Convenience Stores’ latest op-ed on debit-card interchange fees is the most recent in the organization’s years-long effort to obtain government-mandated price controls. But such controls would only increase large retailers’ profits.

Consider the facts. The new Richmond Federal Reserve study finds that of the retailers that have experienced interchange reductions, few reduced the prices of their products and passed the savings on to consumers. Clearly, price caps have thus far failed to help customers at the cash register.

Consumers have also paid an additional price as a result of price controls. The Durbin Amendment has made it much more difficult for banks to offer free or low-cost checking accounts. Many banks previously depended on interchange revenue to support these types of accounts, which otherwise lose money for most institutions. When that revenue was cut, it became much more difficult to offer the same account services.

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