Last year, the Iowans preferred to send Republicans to Washington, giving majority votes to Donald Trump for president, Joni Ernst for senator, and handing over three of our state’s four congressional districts to Republicans. Now, these concerns about Democratic control in Washington appear to be valid, as the main Democrats seek to impose what could be one of the most important and costly regulations in American history.
The policymakers behind the plan are neighboring Iowa Senator Dick Durbin of Illinois and liberal champion Senator Bernie Sanders, the Independent from Vermont. Progressives are seeking to create new credit card regulations that would make it harder for Iowans to access banking and financial services.
Durbin and Sanders seek to impose large government price controls on credit cards. While this may seem appropriately “progressive,” such a policy ignores the real impacts that would be felt by many Americans.
Imposing arbitrary limits on credit card pricing would prevent banks from getting the money they need to provide security and financial inclusion in the digital marketplace. Think of it this way: When a credit card transaction is fraudulent, it’s usually not the customer or the store that pays the price. The credit card issuing bank absorbs the loss. This money has to come from somewhere.
By imposing new restrictions and regulations on credit cards, banks will have to limit their exposure to credit. Many will start by charging more for credit cards and phasing out the âno-feeâ credit cards that many consumers appreciate. It doesn’t take long for the regulations to show what they really are: a hidden, bureaucratic tax.
Consumers will also see other limitations on their credit cards. The average consumer receives almost $ 170 in credit card rewards per year. In total, Americans enjoy $ 40 billion to $ 50 billion a year from these types of rewards. But under the Durbin-Sanders proposal, those rewards will likely decline quickly.
The most frustrating aspect of this proposition is that we don’t have to look into a crystal ball to see what’s going to happen; we only have to look to the past.
Ten years ago, Durbin championed a similar policy that imposed restrictions on debit card transactions, which unfortunately became law. The outcome was bad for American consumers, not the banks he allegedly targeted.
A Federal Reserve study found that Durbin’s policy resulted in a 35% drop in the availability of free checking accounts at banks targeted by the policy. Another Boston University study found that these regulations cost low-income consumers about $ 160 a year and increased the number of Americans without bank accounts by nearly a million.
What Liberal lawmakers never seem to understand is that the increased cost of something limits its availability. Iowians don’t want more expensive bank and credit cards. Under the Biden administration, we cannot afford it.
In just the first eight months of Democrats controlling Congress and the White House, the Iowans are paying more for gasoline, more for housing, and more for consumer goods, the prices of which have risen 5.4% over the course of of the last year.
At a time like this, the last thing Iowans need is to pay more for their bank and credit cards. This is yet another costly liberal political solution that puts the government on the path to our market economy. With Democrats having a narrow margin in the US Senate, we must hope that our Senators, Chuck Grassley and Joni Ernst, will join their colleagues in opposing this costly and unnecessary regulation.
Chris Hagenow is vice president of Iowans for Tax Relief and former majority leader of Iowa House.