Shot Meet Foot

 

Take a march to the right-hand side of my blog where I have the quotes...see the "Liberalism" bleat...yeah, that's where I am going...

As of October 1st, all Bank of America customers (and soon to be many others) will see a new $5.00 per month fee for using their debit card, simply from here on out to be known as The Dick Fee, courtesy of the author of the legislation Senator Dick Durbin, a Democratic Senator from Illinois. While fondly known to most of us as Richard, his girlfriends called him Dick, for short. Don't confuse the Senator though with his boss who has the same name which I blogged about here.

Now, let's take a walk inside of Mr. Durbin's cavernous head. Essentially, here is his creation-- "I pity the retailers who are being screwged by their banks. These evil institutions have imposed a 44 cent fee per debit card transaction on the stores and my law caps the fee at 24 cents per purchase. Isn't this awesome cause now this will save these businesses annually $6 billion and next campaign session retailers will vote for me all while I simultaneously mount my Banks are Evil horse. Additionally, with this new "saving" for the store, indeed they will drop their retail prices for the consumer and the banks will play along nicely. I am so smart."

Uh, no.

You see readers, Dick has ZERO private sector experience. Who do you think is going to pay for the $6 billion in LESS revenue to banks his legislation created--THE CONSUMER, hence Bank of America's new $5 per month fee.

Dick, clearly you are afflicted by Career Politician Syndrome, so a few fundamentals on how retail businesses work:

• While retailers could have griped about bank fees, the reality is they had already priced the 44 cent fee into their product when they established the sales prices of their goods.
• If you think we are now going to see "All merchandise 20 cents off", think again-- show us the evidence.
• Research shows stores who accept debit cards increase their revenue by 33% versus restricting to cash or checks, so retailers were readily on board. Consumers enjoy ease and convenience.
• Debit cards are preferred by these stores over checks as plastic doesn't bounce as much as paper. As an offset to dealing with the hazards of accepting checks, retailers were willing to absorb the cost as there was an intrinsic benefit.

I viewed an evening news report on this story Friday night when competing banks were interviewed and as a whole when asked about them establishing a debit card fee the answer was "not YET". Of course, they are going to hold out in hopes of hordes of consumers dumping BofA for their bank. But this is a classic last man standing scenario with XYZ Bank, who held out the longest, saying "we had no other choice, we had to establish a debit card fee. But please still love us as we were last."

The more savvy consumers will do what I do Dick, use a credit union, which your legislation did not impact. Or, they will use their credit card in lieu of the debit card and pay it in full when the bill comes due. Perhaps they will dump their debit card for the check or cash option. The loss of revenue to banks will far exceed $6 billion dollars and then they will be forced to look at other income sources (or reduce expenses, ie, fire employees), further impacting all bank clientele. Or maybe they will simply fail knowing your minions will come to their rescue and bail them out. Yes, government intervention which was never needed.

As to Dick's reaction when told of Bank America's new debit card fee, he stated "Bank of America is trying to find new ways to pad their profits by sticking it to its customers.” You Dick reduced their revenue and don't expect them to adjust? Laughable, as this time next year you will see the majority of banks imposing a similar fee.

In conclusion, all Dick has done is rearranged the collection agency-- out with the store, in with the bank, all with "good intentions", but as usual, BLIND to the (obvious) unintended consequences. The retailers will not lower their prices and bank customers now have a $60 annual debit card fee. Who will have trouble handling the fee-- THE POOR, the very ones Dick's party claims to protect. Brilliant.

Smoke meet mirrors. Gunshot meet foot. 

"Protection" of the consumer and the poor ends in 474 days.