Unintended consequences of Dodd-Frank legislation

Posted By on December 9, 2011

Is there a the logic to congress adding yet another layer of legislation in believing they are fixing things for individuals? No … it complicates life for individuals and businesses and ends up costing everybody more … especially for those dodd_frankwho appreciate the independence and freedoms that made/makes American unique.

The Dodd-Frank bill in just another example of regulation coming from the top and hindering all of us. We’ve unfortunately permitted the overly enthusiastic big government types, who believe they know better than market forces, to continue to reach their tentacles into the lives of individuals  again and again. Thursday’s WSJ article illustrates the unintended consequences of heavy handed banking legislation as it relates to the use of debit cards. Instead of allowing market forces to set banking fees and allow customers to choose and companies to compete with their products, Washington DC in their wisdom assumed they could dictate what they presumed to be fair practices and pricing. This in turn forces banks to change their profits centers; they now have to charge fees for services that were once offset by profit from the area now legislated by the new Dodd-Frank rules. No real saving for the consumer … just added frustration, complexity and cost that need to be past on in another area. If anything, the bloated laws will cost the end user more do to the additional bureaucracy associated with this new law.

One such area outlined in the article is in the merchant swipe fees that small business have to pay. The new change is particularly harmful to companies which sell low priced sale items like the thousands of coffee shops, or ice cream vendors such as Dairy Queen and video rentals like Redbox. Vendors now have to decide if they can inconvenience customers by offering discounts for cash or even deciding to do away with accepting the debit cards. One merchant from the article mentioned that he is considering adding an ATM machine to his store in order to persuade customers to pay with cash.

Just two months after one of the most controversial parts of the Dodd-Frank financial-overhaul law was enacted, some merchants and consumers are starting to pay the price.

Many business owners who sell low-priced goods like coffee and candy bars now are paying higher rates—not lower—when their customers use debit cards for transactions that are less than roughly $10.

That is because credit-card companies used to give merchants discounts on debit-card fees they pay on small transactions. But the Dodd-Frank Act placed an overall cap on the fees, and the banking industry has responded by eliminating the discounts.

When will Washington learn to just enforce the anti-monopoly and anti-competitive laws already on the books and let the market control the competitive practices that let capitalism offer the best products for consumers?


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  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
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