Price Controls Hurt Consumers

By Douglas V. Gibbs

The Competitive Enterprise Institute, in an effort to show evidence of the left's damaging plans to use price controls against the private industry, in this case against credit and debit card issuers, argues that in the long run government-imposed limits on the fees hurt consumers, credit unions and community banks.

John Berlau of the CEI writes that "If Congress restricts interchange fees, consumers may face higher costs for using their cards." Controlling fees to retailers will hurt consumer spending, since rather than lower prices in conjunction with the lower fees, retailers may pocket the entire windfall to help offset lower profits during a time of economic downturn.

From CEI: "The evidence comes from observing the effects of interchange fee caps in Australia, where consumers have been socked with annual fees and suffered from a reduction in rewards such as airline miles to make up for retailers' reduced payments. Consumers in Australia did not see any tangible reduction in prices stemming from retailer savings. The GAO further notes that the Australia's central bank 'estimates that fees to merchants were lower by about 1.1 billion Australian dollars for the period of March 2007 through February 2008, but officials acknowledged that it would be very difficult to provide conclusive evidence of the extent to which these savings have resulted in lower retail prices'."

CEI also reports that the report on Australia also "found strong evidence that interchange controls would make it harder for community banks and credit unions to compete in offering credit and debit cards. With less interchange fee income, representatives of smaller issuers such as community banks and credit unions told us that they likely would not offer rewards cards and therefore would be unable to compete with the larger issuers in the market."

In addition, interchange fee controls would also hurt the thousands of charities and alumni associations that rely on "affinity cards" for fundraising during a time in which charities are already under attack by the leftist government faction in the U.S.

John Berlau urges that the U.S. Government heed the warnings of what has happened elsewhere when their socialist policies have been tried. Reality dictates that "placing controls on interchange fees actually enriches retailers at the expense of consumers, charities, credit unions, community banks and ultimately, innovation in the American economy."

-- Political Pistachio Conservative News and Commentary

Gov’t Watchdog Finds Credit Card Price Controls Hurt - Competitive Enterprise Institute