Dick Durbin’s efforts to impose price controls on credit card swipe fees are supported by the CFPB and the Department of Transportation, who disparage the charges as “junk fees.”
But, whoops. Durbin and the federal regulators have run into a big PR problem. It turns out that if you put out price controls on the fees, then popular reward programs go away and consumers won’t be too happy about that.
CEI’s Iain Murray explains:
The Director and Secretary of the respective agencies heard from a variety of what are these days called stakeholders, such as spokesmen of industries, labor unions, and people who claim to speak for consumers.
The reason for the Department of Transportation’s involvement is that airlines and their labor unions are keenly aware that the proposed bill threatens credit card reward programs. Airlines get approximately 20% of their revenue from selling air miles to banks to offer as part of their rewards programs.
If this bill results in significantly reduced income from credit card transactions, rewards programs will be the first thing hit. Airlines won’t be able to sell as many miles, which means a big hole in their revenue streams. That will mean fewer flights, fewer jobs, more crowded flights, and higher fares.
It’s a classic example of how well-meaning government interventions in the market almost always leave consumers worse off. Will the politicians ever learn?