Should Congress Promote a Free Market or Fix Prices?

An opinion piece by Lyle Beckwith shows how a free market works for everyone.

January 13, 2017

WASHINGTON – One of the major issues facing the new Congress is whether or not to overturn debit swipe-fee reforms currently in place. Lyle Beckwith, NACS senior vice president of government relations, promoted the value of a free market without price fixing in an opinion piece in The Hill

“Before those reforms, the big banks and credit-card companies fixed prices without limitations in the uncompetitive business of processing debit-card purchases for merchants. Reform gave the banks incentives to set their own prices for processing these transactions and compete like other businesses must. And reform also gave merchants more choices on which companies process their transactions when a customer swipes a debit card to pay for lunch or new shoes,” he wrote.

However, Beckwith cautioned that some would want to repeal the Dodd-Frank financial reform law. “Supporting repeal of reform would be a vote for price-fixing. It’s unfortunate the big banks are so unwilling to compete that they would push members of the committee to support a price-fixing scheme,” he wrote, adding that “even with these reforms, the banks themselves report to the Fed that their average markup on fees is still 500%. That’s a margin most merchants, with their razor-thin profit margins of 1% or 2%, would envy.”

Main Street businesses have been thriving lately, especially because of those financial reforms. “We can’t afford to go back to the old ways. That’s why it’s crucial that the Financial Services Committee not throw out the baby with the bathwater on Dodd-Frank. It’s likely the committee will soon consider a version of the bill it narrowly passed last year. For the sake of a free market that works for everyone, not just the banks, the committee should not touch debit reform.”

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