The Debit Card Fee Debacle: More Totally Foreseeable Unintended Consequences



In today's Wall Street Journal, more tales of the totally foreseeable unintended consequences of regulating debit card and banking fees:

Just two months after one of the most controversial parts of the Dodd-Frank financial-overhaul law was enacted, some merchants and consumers are starting to pay the price.

Many business owners who sell low-priced goods like coffee and candy bars now are paying higher rates—not lower—when their customers use debit cards for transactions that are less than roughly $10.

That is because credit-card companies used to give merchants discounts on debit-card fees they pay on small transactions. But the Dodd-Frank Act placed an overall cap on the fees, and the banking industry has responded by eliminating the discounts.

Coffee shop owner Jason Scherr "is weighing whether the expense of an ATM would justify its installation. If he gets one, he says he plans to 'stick a sign on top of it, calling it a "Durbin ATM."'" in honor of the main proponent of the amendment that capped debit card fees, Sen. Dick Durbin (D-Ill.).

Reason hates to say it, but we told you so.