Over the weekend, one of the most ill-conceived reforms of the Dodd-Frank Act went into effect: the Durbin Amendment. Stripped to its core, the amendment sets price controls on the fees that large banks can charge to their debit-card customers. Since banks now have to look elsewhere for this lost revenue, they are imposing monthly debit-card charges on customers.
Bank of America has, according to New York Times reporters Ron Lieber and Ann Carrns, the "nerve" to impose a $5 monthly debit-card fee on most of its customers—except for those who maintain high bank balances. Other banks have imposed smaller fees between $3 and $4. Still others have stood pat for now.
Those fees turn out to be a big deal. Though Lieber and Carrns denounced the fees as a "tax on pretty much every customer without a healthy salary," they did not bother to point the finger at Senator Durbin for the tax. Lieber and Carrns urged customers to bank elsewhere. Given that threat, they may have to. As George Mason Law’s Todd Zywicki reports in the Wall Street Journal, small branches are closing, free checking accounts are evaporating, and marginal customers are being driven from the banking system to cash exchanges, pawn shops, and high-priced prepaid cards. There is no magic with price controls. They do for banking what they do everywhere else: create product shortages and spawn regulatory intrigue.
During this time of economic distress, why would Congress enact legislation that simultaneously cuts the profits of banks and taxes ordinary Americans? We need to repeal the Durbin Amendment right away or else risk further damage to our fragile economy. I have more to say about all of this over at Defining Ideas.