(Alexandria, VA) – Hot on the heels of the recent announcement that Visa and MasterCard had reached a $7.25 billion settlement over interchange fees, the 362,000-member National Taxpayers Union (NTU) had a simple message for elected officials: hands off! The citizen group has taken an active role in the debate over the Dodd-Frank law’s imposition of price controls on debit fees. The organization’s members are concerned that news of the settlement could give rise to calls for further legislative meddling, a course NTU warns would be counterproductive.
“Further interference from Congress or the Executive Branch, with this settlement or with future legislation or regulation, could hurt consumers, inflict further damage on an ailing economic recovery, and introduce even greater uncertainty in future business decisions,” said NTU President Duane Parde. “Allowing the legal system to function, even if imperfectly, is preferable to more intervention in the marketplace.”
In February of 2011, NTU filed comments with the Federal Reserve on Section 1075 of the Dodd-Frank financial reform bill, which gave the Fed authority to craft rules proposing debit card interchange fee caps of between 7 and 12 cents per transaction (versus an average actual fee at that time of 44 cents). As NTU has encountered in other economic sectors – from health care to energy – government price manipulation has numerous unintended and negative consequences. Although the organization opposed numerous parts of the Dodd-Frank legislation, NTU’s comments pointed out that Section 1075 was a particular threat for several reasons, including:
- If card issuers are unable to recover costs, consumers could be charged more for basic card-related services they’ve come to expect. In addition, card companies would have difficulty making some of the security-related and other investments that keep their networks running efficiently.
- If debit cards are made costlier to users, less economically efficient financial transactions may become more prevalent by necessity, leading to a net loss in economic productivity.
- Even taxpayers could experience direct impacts, if the debit cards that governments use for employee expenses and benefit administration become more expensive.
Later in 2011, NTU supported S. 575, which would have provided a “time-out” from implementation of the Fed’s interchange regulations. This bill failed narrowly, which, according to Parde, is all the more reason for Congress to refrain from intervening in the proposed court settlement and allow a judge to review the terms. It is also good reason for Congress to reevaluate its earlier mistakes in passing Dodd-Frank and rejecting S. 575.
“If Members of Congress truly want to have a constructive role in future financial industry policy, they ought to focus on repealing onerous regulations they have triggered,” Parde said. “At the very least, however, they shouldn’t be second-guessing the legal process at such a delicate stage.”
The 362,000-member NTU is a nonpartisan, nonprofit organization working for lower taxes, smaller government, and economic freedom at all levels. More information on NTU’s work, is available at www.ntu.org.