Durbin Amendment Costs Consumers $22 Billion

All in all, consumers took it on the chin for $22 billion and possibly more. That $22 billion is the present discounted value of the losses to consumers, starting in October 2011 when the caps went into effect, and off into the future.

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The fact that the Durbin Amendment resulted in a wealth transfer to retailers from consumers and banks is not surprising. The regulations shifted more than $7 billion of money from the annual income of banks to the annual income of merchants. There is no reason to believe that merchants would give this windfall back to consumers or that the banks could absorb the full loss in their profits. A wealth of economic studies shows that does not happen in the real world. But, the bill to consumers over time will add up to at least $22 billion, and potentially more.

It is hard for me to believe that Congress could not see this coming. You take away profit from a business and they have to replace it somehow. In this case, banks lost revenue due to interchange caps and as a result profits. Those profits needed to be replaced and so banking fees to consumers increased and other free services were cut to reduce costs.

One of the scariest things a person can say is "I am from the Government and I am here to help!"