Sunday, July 10, 2022 | 2 a.m.
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In Las Vegas and across the country, it is hard to stress the importance of banking and credit access to all families, especially those in the African American community. This access allows us to build wealth, take out loans to start small businesses, and save for the future.
For African Americans in particular, this banking and credit access is essential to overcoming the systemic barriers to financial inequality that we face. Data from the Board of Governors Federal Reserve system in 2019 show that 32% of us are underbanked and 14% are totally unbanked, meaning only 54% of us are sufficiently banked. A recent analysis from the Brookings Institution discovered that African Americans on average pay more than twice as much in monthly bank fee costs compared with their white peers. This is unacceptable.
It is clear that federal legislators need to focus on fixing these inequities in our nation’s banking system and work on expanding banking and credit access. Yet some are doing just the opposite. Big retailers and their Washington, D.C. lobbyists are currently trying to shove through financial policies that will take our hard-earned money straight from our pockets and into theirs.
Most notably, I’m talking about recent efforts to bring back and expand the routing mandates of the 2010 Durbin Amendment. This amendment, which passed at the last minute with very little research on its impacts to consumers, added routing mandates and an interchange fee cap to our debit market. The goal of the legislation was to save money for retailers on processing debit card transactions, so they could pass those savings down to their customers by lowering prices. It should be no surprise that this did not happen. In fact, a study from the Richmond Federal Reserve found that nearly all retailers kept their prices the same or raised them after the Durbin Amendment passed, even though they collected $90 billion in extra revenue.
We can clearly see that the Durbin Amendment did not give consumers the savings it promised. On top of this, the amendment actually took money away from everyday people. Forcing banks to lower rates for merchants to stay competitive, banks saw huge interchange revenue losses. To make up for the losses, they raised fees, cut free checking, and hiked up account minimum balances — all things that disproportionately impact the African American community.
A 2014 study from George Mason University found that the Durbin Amendment increased our country’s unbanked population by 1 million Americans. Of course, this was primarily in minority and low-income communities where people already struggled to access banking. The National Black Chamber of Commerce even spoke out against the amendment after its passage, with its co-founder and president pointing out that the amendment “threatens the financial future of millions of up-and-coming consumers and entrepreneurs.”
After all this, Congress must reject any attempts to extend the Durbin Amendment routing mandates to credit cards. Banks will again lose billions and pass these losses onto consumers, this time by trying to cut back on credit card benefits. This means raising interest rates, hiking fees and implementing stricter credit standards, transferring as much as $50 billion annually away from consumers and directly to big retailers. Those with lower credit scores and financially marginalized communities will be the first people kicked out of the credit system.
Congress must reject any attempts to impose routing mandates on our credit market. Routing mandates will make credit more expensive and less accessible, something our community cannot afford.
Lauren Brooks is a government affairs and political strategist who lives in Las Vegas.
