Congress will soon consider the Financial CHOICE Act (FCA), the comprehensive bill aimed at correcting the mistakes of the Dodd-Frank Act and earlier financial laws such as Sarbanes-Oxley. Among those mistakes was the “Durbin Amendment,” which imposed a price cap on the fees banks can charge merchants when customers use the bank’s debit cards to buy goods or services from the merchant. Despite literally thousands of years of evidence that price caps don’t work, big merchants and their allies are lobbying hard to get repeal of the Durbin Amendment out of the FCA. Two important new pieces of research underline why it should stay in.
The first is an update of a 2014 paper for the International Center for Law and Economics by Todd Zywicki, Geoffrey Manne, and Julian Morris that demolishes the claim that the Durbin Amendment would be good for the consumer as their costs would be lowered. Its findings are: