This week, a bill came before the State Assembly that would “ban” debit card fees. It never ceases to amaze me how people seem to think that if the government steps in and bans something, it will go away entirely.
The reality is that banks charge retailers a transaction fee for using debt cards and credit cards. Retailers can choose to charge their customers this fee up front, or they can simply pay the fee and (presumably) build it in to the cost of their goods and services. Either way, the fee has to be paid and the current system that allows retailers to charge the fee on top of the transaction is transparent. Consumers can choose to either pay the fee, pay with cash, or take their business elsewhere.
By “banning” the fee to consumers, we don’t get rid of it. It still has to be paid and banks can still charge for it as there is a cost to them to provide the service. What SB 933 ends up doing is eliminating transparency for the consumer and completely shifting the cost of the fee to the small business retailer. The consumer no longer gets a choice, the small business gets stuck paying the transaction fees and in the end, consumers all end up paying more for their goods and services in order to subsidize those who use debit cards. It’s just generally a bad idea. Here is the recorded vote on the bill and below is a video of my arguments on the floor of the Assembly.