Retailers say new government restrictions on interchange fees will save consumers money, based on the assumption that merchants will pay less to banks on consumers' plastic money transactions and pass along the savings. And some economists and consumer advocates agree.
Banks say the new restrictions will hurt their ability to offer reasonably priced banking products and retailers won't share the wealth with consumers since the law doesn't require that they pass along any savings. And no doubt some economists agree with this point of view as well.
Bankrate readers suspect they'll have to pay more either way -- or both ways -- judging by a few comments on my recent blog post, "Loss of debit fees to 'wreak havoc.'"
Readers suggested that rather than lose the income on interchange fees, banks will simply curtail debit cards as a feature on most accounts and instead offer them only on accounts that have higher fees. If that happens, banking customers will pay the banks directly, rather than through the merchants in the form of higher prices.
No one, apparently, was sold on the retailers' argument that lower interchange fees will trigger lower prices and savings for consumers.
That's pessimistic thinking, but I have to agree it's a likely outcome and not a positive one for the consumers who were supposed to save money from the new rules.
But the big unanswered question in the new direction for interchange fees is the same question that might well be asked about most of the new financial reform law, and that is: What will the regulators do?
The question of "reasonable" interchange fees is a puzzle that's been assigned to the Federal Reserve, an agency not known for its consumer friendliness or consumer protection prowess.
Retailers might cry foul, but given that the banks are much closer to the Fed than either retailers or consumers are, might not the Fed yet bow to the banks and simply declare that the current interchange fee structure is indeed already "reasonable," an outcome that would maintain the status quo anti bellum?
And might consumers actually prefer that outcome?