{"id":15554,"date":"2010-06-24T20:00:40","date_gmt":"2010-06-25T00:00:40","guid":{"rendered":"\/\/www.askmrcreditcard.com\/news\/?p=15554"},"modified":"2010-06-24T20:00:40","modified_gmt":"2010-06-25T00:00:40","slug":"hip-hop-executive-sees-durbin-for-what-it-is","status":"publish","type":"post","link":"https:\/\/www.askmrcreditcard.com\/news\/hip-hop-executive-sees-durbin-for-what-it-is\/","title":{"rendered":"Hip Hop Executive Sees Durbin For What It Is"},"content":{"rendered":"

The Durbin amendment limiting interchange fees, or swipe fees has been getting a lot of contradictory press.\u00a0\u00a0 On one hand, you have the retailers and merchants who overwhelmingly support the Durbin amendment for its regulation of swipe fees.\u00a0\u00a0\u00a0 They oppose swipe fees so strongly because they are the ones who pay them<\/strong>, despite their desperate attempt to convince gullible reporters<\/a> otherwise.\u00a0\u00a0\u00a0 Even executives from home improvement stores like Home Depot and Lowes have admitted<\/a> that the money saved by paying lower swipe fees will be used\u00a0 to “hire employees or build more stores,” not necessarily lower prices.\u00a0\u00a0 You would have to be a complete fool to swallow the merchant’s claims that the cost of swipe fees are “passed directly to consumers in higher prices.”\u00a0\u00a0\u00a0 A far more persuasive argument would be that the swipe fees are actually passed remitted to consumers in the form of cash back and other rewards.<\/p>\n

Jennifer Waters at MarketWatch gets it when she writes<\/a>:<\/p>\n

But it’s unlikely any savings will be passed on to consumers. A similar fee rule passed in Australia, but consumer prices didn’t fall, mainly because the banks found other ways to drum up the lost revenue.<\/p>\n

“If a company saves money on its electric bill or rent, you don’t necessarily see a corresponding drop in prices,” said Gerri Detweiler, a credit adviser with Credit.com. “It remains to be seen how this will wash out.”<\/p><\/blockquote>\n

Enter A Hip Hop Executive<\/strong><\/p>\n

At first glance, it is really hard to see why Russell Simmons<\/a>, the founder of Def Jam records has an opinion on this issue.\u00a0\u00a0 It turns out that Mr. Simmons is also in the business of pre-paid debit cards that are being marketed to people who otherwise do not have access to banking resources such as credit cards and checking accounts.\u00a0\u00a0\u00a0 Simmons recognizes that the present system, where retailers pay debit card fees<\/strong>, allows companies like his to offer these financial products at no cost to the consumer<\/strong>.\u00a0 The retailers, who choose to accept debit cards<\/strong> pay the fees, so that the customers do not have to.\u00a0\u00a0 If the banks had to pay the fees, they wouldn’t bother offering these products for free, and the costs would be levied against the consumers.<\/p>\n

Simmons argues in this editorial at the Huffington Post:<\/a><\/p>\n

No one has yet been able to tell me how Senator Durbin’s amendment will keep the under-served from being hurt by higher fees for the very basic service that debit cards provide or how the amendment will ensure lower prices for consumers instead of bigger profits for merchants. I can’t believe financial reform has come down to this: big retailers in a money grab on the backs of the poor and under-served.<\/em><\/p><\/blockquote>\n

While Simmons is referring to debit cards, the same argument holds true for credit card interchange fees, admittedly without the implications for the poor and under-served.\u00a0\u00a0\u00a0 According to the Washington Post, Simmons arguments are being heard.<\/a><\/p>\n

I admit that the interests people like myself who take\u00a0 advantage of cash back and reward cards are not as important as the plight of the “poor and under-served”.\u00a0\u00a0\u00a0 Nevertheless, the same economics that Simmons sees affect both credit and debit card users.\u00a0\u00a0\u00a0 Debit card users benefit from the current system by getting free access to the Visa and Mastercard processing systems without the credentials necessary for a credit card and without any of the associated risk of debt.\u00a0\u00a0 Likewise, credit card users get a competitive market of no-fee credit cards as well as cash back and other rewards.<\/p>\n

Retailers could make an argument that cash back and other rewards are perversion of the system that hurts merchant’s profits.\u00a0\u00a0\u00a0 That would be an honest argument about the merits of how our payment system has evolved.\u00a0\u00a0\u00a0 What they cannot honestly argue is that credit and debit interchange fees are “like a tax on consumers” that merely “get passed on in the form of higher prices.”<\/p>\n

It is even more ridiculous when convenience store owners argue that interchange fees are not proportional to the costs of the service being provided by the credit card networks.\u00a0\u00a0 Think about that for a second.\u00a0\u00a0\u00a0 The entire business model of a convenience store is to charge people an enormous markup on inexpensive products in return for “convenience”.\u00a0 It is quite funny that they object to the credit and debit card industry doing the exact same thing.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Durbin amendment limiting interchange fees, or swipe fees has been getting a lot of contradictory press.\u00a0\u00a0 On one hand, you have the retailers and merchants who overwhelmingly support the Durbin amendment for its regulation of swipe fees.\u00a0\u00a0\u00a0 They oppose swipe fees so strongly because they are the ones who pay them, despite their desperate […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[8],"tags":[],"yoast_head":"\nHip Hop Executive Sees Durbin For What It Is<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.askmrcreditcard.com\/news\/hip-hop-executive-sees-durbin-for-what-it-is\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta 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