Ronald Reagan reportedly said that “The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’” The government said it was going to help banking customers avoid being exploited by their banks, but the latest news suggest that the government may have spoiled the way millions of Americans conduct their business.
Two men from the government, Democrats Barney Frank and Chris Dodd, sponsored legislation that could make banking costs escalate to the point where many no longer will be able to afford a bank account.
Recent changes to banking laws cap the amount a bank can charge for a transaction processing fee at $.12 each, an amount substantially lower than the current average transaction fee of $.44. This means that banks will have to find new ways to make money from their customers and limit the number of money-losing transactions they process. In the end, this means that customers may no longer be able to use their bank-issued debit cards at will.
Customers may first notice that their bank will start charging an annual fee for the privilege of carrying a debit card. It gets worse too because ABC Action News reports that banks are also considering imposing fees on checking accounts as well. The apparent goal is to compensate for the lost per-transaction revenue that results from the new regulations and perhaps put a little extra icing on the cake.
In summary, government rules designed to reduce the burden on customers will apparently force customers to pay more than ever for banking services. Some customers may be forced out of their bank accounts into cash and prepaid financial services such as those that are offered by companies like Green Dot.
Right now it is unclear whether or not the Obama regime which helped push the new financial reform measures through Congress was aware that the law would impose significant hardships on American consumers or if such consequences were intended.
One thing seems certain: banks are unwilling to allow the new cap on processing fees to impact their bottom line, so the money they lose on the cap will be billed to customers elsewhere.
Besides applying surcharges to debit card and checking accounts, banks are also looking at limiting the dollar amount customers can spend with their debit cards to $50 or $100. The move would drastically reduce the number of transactions and would therefore save banks billions of dollars even while they harvest a bumper crop of new fees from their customers.
According to CNN Money (http://money.cnn.com/2011/03/10/pf/debit_cards_limit/index.htm) another reason for capping the amount customers can spend with their debit cards is to reduce banks’ exposure to fraud. The processing fees have been helpful in mitigating losses from bad transactions, but with the fees dramatically pared they can no longer afford the risks associated with large transactions.
As Americans are forced away from banks, they may find accessing their money to pay bills and buy groceries more difficult than ever. Paying with checks is an increasingly difficult and expensive ordeal and credit cards are more expensive and harder to get than ever before.
Dodd and Frank said they wanted to help. Will someone please tell them to stop trying?