House Democrats are calling for an investigation of large banks that recently started charging debit card fees. A group of four Congressmen claim that major banks like Chase and Wells Fargo may have run afoul anti-trust laws through collusion. The four believe the timing of the new fees from each bank is suspicious.
They group has submitted a letter to Attorney General Eric Holder asking for the Department of Justice to look into the matter. John Conyers (MI), Keith Ellison (MN), Raul Grijalva (AZ), and Pete Welch (VT) all signed the letter.
Numerous large banks recently began charging fees for debit card usage citing new restrictions on interchange income from last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act. One specific measure, know as the Durbin Amendment, limits the income financial institutions can earn from debit card transactions, known as interchange.
Merchants indirectly pay financial institutions a small fee per transaction in order to accept debit card payments from customers. These costs are generally passed on to the customer in the form of higher prices. In turn, financial institutions use this income to provide debit card services free of charge for their customers. The Durbin Amendment placed a cap on the fee, which reduced income for banks and credit unions. In order to cover the new cost, larger banks have started charging for debit card usage, most notably Bank of America’s $5 monthly debit card fee.
All four House Democrats who signed the letter to the Attorney General voted in favor of the law. Locally, Senator Sherrod Brown, a Democrat, is the only Dayton-area representative in either chamber of Congress to vote for the bill. Then-Senator George Voinovich and local Reps. John Boehner, Mike Turner, and Steve Austria (all Republicans) voted against the law.
Ironically, in voting for Dodd-Frank, the four House Democrats essentially caused the new fees by artificially reducing interchange income for financial institutions. The Durbin Amendment was a controversial proposal, with banks and credit unions lobbying heavily against the rule and merchants like Wal-Mart lobbying in favor of the limit.
Merchants had argued that the measure would save consumers money while financial institutions warned that free checking—a staple of banks and credit unions—would be at risk. The latest Consumer Price Index, released by the Bureau of Labor Statistics, reported that consumer prices have increased by 3.8% over the past year. (CPI measures the cost of gasoline, food, shelter, apparel, and other goods.)