The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Consumers’ Well-Being Not So Important After All

On July 11th, 2011, posted in: Uncategorized by

Unapologetic liars!  That’s right.  Merchants, those folks we buy goods and services from, got caught smack dab in the middle of a lie last week.  Rather than show some contrition or empathy for consumers, these purveyors of profits showed their ample greedy side with no remorse for you and me whatsoever.  Disingenuous is much too kind a word.

What happened was that the Federal Reserve decided that Senator Dick Durbin’s (aka Senator Walgreens) blatant attack on the banking industry as it related to shrinking income from debit card interchange was probably too aggressive and, as a result, added back into the equation about 12 cents per transaction on average.  Financial institutions will receive consideration for the costs associated with issuing the cards, assuming the fraud, processing the transactions, etc.  This got the retailers mad, because they were allegedly going to give the 12 cents to us, the consumers.

See, the retailers’ lobby had originally won this bloodletting battle over the cuts in debit interchange put forth by Senator Walgreens, and the party was on.  As of a couple of weeks ago, the Senate passed the Durbin Amendment, thus cutting financial institutions’ revenue associated to our debit card usage by about 70%.  Retailers jumped for joy because this would allow them to pass on the cost savings to the consumers.  Their lobby was based on such a noble idea!  After all, merchants would become the caretaker for the consumers’ well-being.  As is typical, the Senate fell for such blather and gave us yet another decision founded in something other than sound judgment.  But, I digress.

But then, something happened on the way to pure profit.  Retailers and merchants everywhere screamed bloody murder.  While I don’t think you’ll find this a surprise, in their disgust over losing 12 cents per transaction, there was nary a mention about consumers.  Oh no, they screamed like a hungry baby about how they (the retailers) were getting screwed by the Federal Reserve’s give-back to big banks.  Wait a second.  I thought their entire lobby position was to pass the savings on to you and me?

We didn’t really believe these money grubbers, did we?  They serve stockholders.  They make money for whoever has their name on the sign out front or whoever owns stock.  Retailers, by design, are never in the business of giving the profits they make to consumers – only the U.S. Senate believes otherwise.  It is grossly incompetent to not optimize profits when one exists only to make money for their stockholders.  The pure profits bestowed on them by Senator Durbin was literally “pennies from heaven” and pure gold for their bottom line.

C’mon, you knew that the consumers’ well-being was never of interest.  And, sure enough, we saw what they were made of when the Federal Reserve cut their gain.  We’ll test their nobility by checking the pricing of products in the local Walgreens a number of times over the next year.  After all, they still clear an extra 20 cents per debit swipe transaction and, according to their lobby, the revenue should show up in a price reduction.  Really?  You think?

If a business or a bank is for-profit, they will always pay somebody other than consumers first – that’s just the way it is.  My gripe is when they blatantly lie about their motivations.  Shame on the Senate and retailers everywhere!

By the way…credit unions are not for profit.  Think about it.

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