Trumps financial deregulation may hit consumers wallets hard
If President Donald Trump gets his way, Congress will repeal the Dodd-Frank Act and do away with the Durbin Amendment that caps fees charged by banks to process retail debt card transactions. Repealing the Durbin Amendment could cause retailers to increase their prices, and it may be a boon to banks, so let's learn more about what's at stake.
After the banking industry brought the nation to the brink of a depression in 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act includes wide-ranging regulations on banks, requiring significant reporting and oversight of their financial condition in a bid to prevent too-big-to-fail bank bailouts in the future. The Act is the most comprehensive banking reform since the 1930s, but it's widely been panned for limiting borrowers access to capital, increasing costs, and reducing the industry's ability to return money to shareholders.
The Durbin Amendment is a provision in the Dodd-Frank Act that grants the Federal Reserve the authority to cap interchange fees that are charged to retailers by banks and transaction processors, including Visa and Mastercard.
Historically, interchange fees were negotiated between retailers and banking institutions, and as such, large retailers often paid lower interchange fees than small retailers. Overall, the average interchange fee charged to retailers prior to the Durbin Amendment was $0.44 per transaction. While retailers may have absorbed some of that fee, it's likely that most of it was spread out across consumers in the form of higher prices on goods and services.
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