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One of the lessons my dad taught me early in life was the \u201claw of unintended consequences,\u201d which is that the actions of people \u2014 and especially of government \u2014 always have effects that are unanticipated or unintended. We saw this a decade ago with the Durbin Amendment from the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed in the wake of the Great Recession. It limited the amount of money banks could make from debit transactions. They said this would be great for consumers; it was anything but.<\/p>\n
Almost immediately, debit card rewards vanished \u2014 and who did that hurt the most? Consumers with lower income and credit scores, who may have a hard time getting approved for credit cards.<\/p>\n
And what about prices for consumers? A 2015 economic survey from the Federal Reserve Bank of Richmond found little evidence that merchants passed along their cost savings to consumers. Most respondents (77.2%) indicated they kept prices the same in the wake of the new rules, while a sizable portion (21.6%) actually increased prices. Only 1.2% passed on lower prices to customers. With the Durbin Amendment, the cost-savings went to the bottom lines of shareholders and retailers, not consumers. And now Sen. Richard Durbin is trying to accomplish the same, but on a much larger scale.<\/p>\n
Many well-intentioned lawmakers have tried to solve problems, but in the end, created bigger problems. We see this with taxation \u2014 state lawmakers may have wanted to raise revenues and increase taxes, but did not anticipate that companies and taxpayers would leave for states with lower taxes. In the end, the states lose jobs and take in less revenue.<\/p>\n
A law with highly unfavorable consequences for those who love credit card points and rewards is currently being reintroduced on Capitol Hill. The Credit Card Competition Act of 2023 (\u201cthe Big-Box Bill\u201d) proposed by two U.S. senators \u2014 Richard Durbin, D-Ill., and Roger Marshall, R-Kan. \u2014 would be disastrous for consumers, especially the millions of consumers who get immense value from cash-back and travel rewards on credit card transactions. The law, which is heavily backed by the retail lobby, would regulate the rate that Visa and Mastercard charge retailers to process transactions on their networks.<\/p>\n