Zywicki Interviewed on Durbin Amendment
Professor Todd Zywicki was interviewed regarding his perspective on the Durbin Amendment by nerdwallet, an online credit card news site.
"“Anyone who’s ever taken a single economics class can see it’s a bad idea,” says Zywicki of the Durbin Amendment. “The government is picking winners and losers. The winners are big-box retailers, and the losers are consumers.”
Zywicki's comments can be summarized in three parts:The Durbin Amendment will shift the way we bank; price controls just won't take; and even if retailers do benefit, consumers will not.
Perspectives on the Durbin Amendment: Prof. Todd Zywicki, nerdwallet, October 18, 2011. By Anisha Sekar.
"As larger banks raise fees on checking accounts and debit cards, which some say is a necessary reaction to the Durbin Amendment, more people are switching to credit unions and local community banks. That in itself is not a negative, but Zywicki argues that banks, facing lower revenues, will close branches and lay off workers.
"They will become less consumer-friendly, more prone to fraud, and less likely to offer products such as mobile or online banking. The Durbin Amendment exempts small financial intuitions with assets under $10 billion, which covers almost all credit unions, community banks and online banks. However, Zywicki believes that they will not emerge unscathed from Durbin: 'Most experts believe that this two-tier pricing system will fail.'
"Zywicki also predicts – and we’re already starting to see this – a shift from debit cards to prepaid or credit cards. A study from the Boston Fed shows that as debit cards become more expensive, credit card use rises. Because credit cards have higher interchange fees than debit cards did, even before Durbin, retailers won’t save as much as they think they will. Zywicki adds that a shift away from debit harms consumers, because credit cards inevitably lead to credit card debt, and prepaid debit cards often come laden with hidden fees."