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  • Cloakroom Confidential: U.S. on Regulations Better Than Socialist-European One

    Big fight in Congress as to whether Congress is again going to set price controls on payment processing fees at your local retail store. Capping the fees did not lower prices for consumers, yet somehow Congress think the same failed idea is going to work this time.

    The left points toward Europe as an example where caps on fees have been implemented widely. The problem with capping fees on payment processing fees is that it removes an incentive for the credit card companies and banks to innovate and create quicker and more effective ways to help retailers sell products.

    According to a blog post at The Hill – “Over five years ago, arguing that it would benefit consumers, they successfully lobbied Sen. Dick Durbin (D-Ill.) to insert a provision in the massive Dodd-Frank bill that capped the fees retailers paid for using debit cards.  Since then, retailers have pocketed billions.  That wasn’t enough, so now they’re back and asking for more price controls.”

    Following a European model would be a mistake. The American economy is consumption based where the stagnant European nations are more prone to savings. The price controls will probably not help one consumer.

    More, from The Hill blog post “Three economists recently studied the matter for the academic journal Economic Quarterly, conducting a survey of 420 merchants across 26 retail sectors two years after the price controls went into effect. According to the study, the price controls have ‘substantially reduced’ average revenues to the credit card companies ‘by almost one half.’ But retailers didn’t lower prices to reflect the changes.” Think about an America were suddenly it become a big loser for credit card companies to let all retailers use credit cards for purchases in certain smaller chains.

    Retailers have hired a mob of lobbyist to push for this idea because they know that the retailers will make far more money if the fees are capped. During the fight inspired by Sen. Dick Durbin, the retailers did not hide the fact that they were going to make more money if the government engaged in some crony capitalism to rig the system in their favor. Let’s not let that happen again.

    Congress should resist Euro-Socialist and Crony Capitalist ideas that will benefit a handful of politically connected interests while hurting the consumer.


    Cloakroom Confidential

    Cloakroom Confidential

    Cloakroom Confidential was a longtime Capitol Hill staffer and insider who has contacts in the House and Senate at the highest levels.

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