Congress hailed it as a victory for consumers last year when it decided to impose price controls on banks, capping "swipe" fees they charge merchants for debit-card transactions.
In reality, what Congress imposed was a new monthly tax on debit-card users.
Bank of America recently announced it will charge its debit-card users a $5 monthly fee in an effort to offset billions of dollars of revenue lost to Congress’ intervention. Wells Fargo, the country’s biggest bank, is testing a $3 monthly fee for debit cards later this month. And Chase has piloted a $5 fee in Wisconsin.
Merchants complained that banks were gouging them to subsidize other operations, such as free checking. They insisted government should regulate debit fees to reflect the true cost of processing transactions, lowering prices for retail customers.
As a result, banks anticipate losing billions of dollars of revenue each year. Such losses, of course, simply get passed along to consumers who will see real banking-fee increases.
Sen. Bob Corker, R-Tenn., said telling private companies what they can charge for goods and services amounted to price fixing.
The new debit-card fees are another example of why government should not pick losers and winners in the marketplace: The likeliest loser is the consumer.
© 2011 Lakeway Publishers, Inc.