Zywicki Interviewed on Legacy of the Durbin Amendment
In an interview with Card Hub, Professor Todd Zywicki discusses the cap on swipe fees provided for by the Durbin Amendment and the manner in which it has restructured the payments landscape and harmed consumers.
Largely a product of lobbying and political compromise, the Durbin Amendment created revenue losses for debit card issuers that were made up for in increased checking account fees, elimination of rewards programs, and increased use of unregulated products like credit cards and prepaid cards.
"My biggest problem was that it was entirely predictable, that what has happened was exactly what was going to happen," says Zywicki. "Price controls don't work in a competitive market."
The Durbin Amendment in Review, Card Hub, June 13, 2012. By John Kiernan.
"'Every congressman has businesses in their district, and the big box retailers really lobbied hard for this,' said Zywicki, who noted that the Durbin Amendment will save large merchants tens of millions in interchange fees annually. 'I think a lot of politicians, especially republicans, are having buyer’s remorse once they’re finding out what they voted for.'
Does that mean we can expect legislative changes?
"Well, the Durbin Amendment would be repealed in a perfect world, according to Longbrake, but he and Zywicki agree that is unlikely. The merchants simply have too much clout. At least swipe fee regulation won’t be extended to credit cards and other unregulated financial products. Politicians don’t have the stomach to expand the law’s scope.
We’re therefore basically stuck with what Zywicki calls the 'de facto destruction of debit cards in America, which has probably been the most popular financial innovation in the past century.'”