editorials

Star Tribune Editorial

In the 2010 rush to penalize the banking industry for the subprime mortgage collapse and other financial shenanigans, U.S. Sen. Richard Durbin managed to rally considerable support for an amendment to the Dodd-Frank financial reform act that would hammer banks with what amount to price controls while creating a windfall for retailers.

Last week, however, a bipartisan group of lawmakers moved to delay the wrongheaded change.

"I think there is a little bit of buyer's remorse," Sen. Jon Tester, D.-Mont., told the Washington Post.

The Durbin amendment authorized the Federal Reserve to greatly limit how much banks with assets of $10 billion or more can charge retailers in so-called swipe fees for debit-card transactions.

Retailers have been railing about the fees for years, arguing that banks were making too much money off the growth in debit-card purchasing.

Thanks to Durbin, an Illinois Democrat whose state happens to be the home of Walgreens, the amendment sailed through Congress last summer.

Lawmakers conveniently ignored that banks must cover the costs of processing transactions, including taking on the risk of fraud.

The Federal Reserve said in a draft rule issued in December that it would cap fees at 12 cents per transaction, down from the 44-cent average charged in 2009, beginning in July.

TCF Financial sued the Fed over the amendment, warning that the 12-cent limit would cut its annual profits from $120 million to $70.4 million.

Congress wrongly decided to pick a winner and loser in the debit card business, and by distorting the marketplace the lost revenues for financial companies will lead to higher fees and reduced services for consumers.

The retail lobby is thrilled, of course, and continues to repeat the false promise that what it gains in the transfer of fee costs will be magically passed along to consumers.

Don't spend that savings just yet.

A better option would be for Congress to listen to Tester, whose bill would smartly delay the change for two years and require the study of its impact that lawmakers skipped the first time around.