Department of Unintended Consequences

by Pejman Yousefzadeh on September 30, 2011

This is what happens when you have public officials who don’t understand economic policy:

Some Americans are outraged that Bank of America intends to charge its customers a $5 fee for using their debit card. And simply switching banks might not help: others are expected to follow. While frustration over yet another bank fee is understandable, this one should surprise no one. Congress acted to cap the debit fees that banks could charge retailers last year, and banks are reacting by directly charging their customers a portion of these lost fees to make up the difference. The move could mean the end of the debit card.

I have heard commentators complain that the current Congress does not stay in session all that long, and does not pass many bills. These pundits seem to forget that it’s just as important to consider what Congress refrains from doing, as it is to consider what Congress actually does. In this case, it would have been better for Congress not to have acted. Maybe we ought to go out of our way to praise Congressional laziness more often.

Incidentally, if there are readers who wonder why I am a fan of small government, they need only consider this story. And of course, major raspberries to the Obama Administration for approving of the legislation that has led to these fee increases. Congress isn’t the only branch of government that deserves blame for this ridiculous and detrimental policy outcome.

  • David M

    I am curious why it is preferable the fees are hidden when they are passed on to the consumer by the retailer?  Having the fees out in the open is only detrimental to the banks, both the consumer and retailer benefit from this.

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