Bank of America Changes the Rules During the Game

wkmac

Well-Known Member
Congress, Not Banks, Are Gouging American Consumers
That WSJ article quotes one angry Bank of America customer, saying that she feels the bank is "gouging" her. That's not quite right: she paid this fee before -- she just didn't know it. It was incorporated into the prices of the goods and services that she purchased with her debit card. The fee was then paid to banks by the retailer where she shopped. Now Bank of America is just cutting out the middle man to collect a portion of the fees. This move isn't meant to create new revenue for the bank, but to replace the revenue that Congress forbid them to collect through their old fee policies.
In a perfect world, customers would end up paying the same amount in fees as they did before through this new approach. The only difference should be that they're paying more money directly and less indirectly. That means that the prices of the goods and services they purchase ought to decline accordingly.
Unfortunately, we don't live in a perfect world. As I pointed out on Wednesday, retailers aren't cutting prices. Instead, they're pocketing the $7 billion or so they'll save in fees. While this could theoretically change in the future, they have indicated that they aren't cutting prices at this time.
So customers will end up paying more than they did before once this new law goes into effect, but not because the banks are creating a "new" fee, but because the government forbid them to make full use of their old one. This financial regulation effort will amount to a gift to retailers, courtesy of Congress.

Did Congress Kill the Debit Card?

In an OT manner, the fact that businesses aren't lowering prices in the face of this fee cut if you will sure hurts the FairTax argument that the prices of goods and services will fall to make the FairTax sales tax cost neutral to the consumer. I always thought that was an assertion in the Fairtax supporter debate that should best be left on the sidelines. In time, it could become true but it's a stretch to argue it's an immediate effect.

Full Disclosure: I support the 0-0-0 plan so there you go!
 
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