This may have escaped your attention, but some of the nation’s debit-card issuers (financial institutions) have been overcharging on debit-card fees.
That, at least, is the opinion of U.S. District Court Judge Richard Leon who two weeks ago, according to a Thursday, Aug. 15, Wall Street Journal report, “tossed out a Federal Reserve rule governing debit-card fees” and “raised the ante at a hearing last Wednesday (by) suggesting banks would not only collect lower debit fees going forward, but may have to reimburse ‘funds that have been collected but shouldn’t have been.’”
That’s a tough ruling against the banks, and a stern criticism of the Federal Reserve board. “We’re not putting a man on the moon here,” the judge told the Fed, giving that institution one week to decide how much time it needs to rewrite the rule so that it more fairly reflects the dictates of the 2010 Dodd-Frank financial law that, the Journal wrote, “required the Fed to limit ‘interchange fees’ to ensure they reflect the actual cost of processing debit-card transactions.”
It appears the Fed had initially set a cap of 12 cents per transaction, but later upped it to 21 cents with a few allowances for a few pennies more. Before the 2010 law, banks had routinely been charging an average of 44 cents per transaction, according the Journal’s report.
Judge Leon is now suggesting the Fed lower the rates and that lawyers may need to determine how much to reimburse merchants who have been overcharged. Card issuers made $15.4 billion from the debit-card fees in 2012. The banks and credit card firms who issue the cards say they need the revenue to pay for the processing expenses, but merchants counter that the fees are well above the banks cost. Judge Leon apparently agrees.
We note this here because it’s a lesson to all Vermonters and Americans that a close watch must be maintained to assure that corporate favortism isn’t skewed to one particular industry at the expense of the public good. What the Dodd-Frank legislation tried to correct in 2010 was the overt advantages that laws passed since 1998 and throughout the Bush administration gave to the financial industry and that contributed to the Great Recession. On the heels of that near catastrophe one might think Congress would be on its best behavior to assure the financial industry was held in check, but clearly that is not the case. It is also discouraging to know that the Federal Reserve is not up to the task of riding herd on its own kin.
Vermont’s Sen. Bernie Sanders continues to be one of the few who rails against such injustices, but he needs the public’s continued support on these issues if his voice is resonate. Thankfully, Judge Leon stepped in this past week to add the court’s voice on the issue and send another shot across the bow of those in the finance industry who overreach at the public’s expense.
Angelo S. Lynn