Fair Banking

It looks like retail lobbyists have launched their counterattack on the financial industry, following its criticism of the Durbin interchange amendment. It is difficult to determine whether the retailers underestimated the fury of the financial industry, or whether they even expected it. But a representative of the convenience store lobby recently called the financial industry’s concern over Durbin’s effect on small institutions “a scare tactic.”

 Ditto a speaker for the National Retail Federation who said "It looks like the big banks that have been ripping off consumers with hidden swipe fees are going to have to find a new talking point now that their small bank scare tactic is moot." One consultant went  so far as to allege that the major financial industry players were raising the issue of small banks and credit unions as a ploy to keep them lobbying against Durbin.

But if the retailers devised this "scare tactic" talking point to call the bluff of the financial industry, they may have overplayed their hand. Just last week. Regions Bank, the Southeast banking powerhouse, announced that it would no longer accept customers into its Relationship Rewards Program. The reason: the loss of debit card interchange revenue expected from implementation of the Federal Reserve’s rule capping those fees.

Also last week PNC Bank announced that it was ending its debit card rewards program, another victim of Durbin and the looming fee caps. In addition, the Pittsburgh-based bank announced that it was ending its policy of free out-of-network ATM transactions for customers, although free checking will remain. PNC, with nearly 2,500 branches, is retooling its consumer fee structure. Why? Again, the impending impact of the Fed’s Durbin fee caps.

Regions and PNC are just two institutions that are engaging in a practice that has been termed “fair banking.” Translation: The consumer once again gets stuck with the tab for an ill-advised piece of legislation. While that may be scary, it’s not a scare tactic. It’s what happens when any special interest group convinces lawmakers that something from which its members directly benefit will be in the best interest of consumers. It’s a zero-sum game. Under Durbin revenue currently accrued by financial institutions for a service they provide will accrue to Big Box retailers and the crowd that charges $4.99 for a large slushy.

So with its fair banking strategy, the financial industry is taking the wise step to inoculate itself against the effect of the Fed’s rules by re-aligning consumer banking services and consumer fees, and figuring out what will make the most sense for everyone in a post-Durbin world.

Fair Banking