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The costs of financial reform are adding up as a potential curb on interchange fees is causing banks to cancel debit card reward programs. Ripple effects from financial reform laws are starting to be observed, as conveniences might be the cost that consumers pay to be protected from financial institutions. However, the cost of financial reforms is starting to make lawmakers wonder if the benefits aren’t worth the costs of enacting such legislation. Source for this article - More banks ending debit card rewards by MoneyBlogNewz.

Giving up consumer advantages for interchange fee cap

banks are desperately trying to find new ways to make money and save money. This is due to the proposed cap on interchange fees, also called “swipe fees,” where merchants are required to pay banks anytime a card is swiped. There have been fewer free checking and debit card programs available. JP Morgan Chase ended its debit card rewards program and additional are following suit, according to CNN. Debit rewards are no longer offered to customers of Wells Fargo subsidiary Wachovia while April 15, Wells Fargo will follow. Citibank recently disclosed that the bank is “in the process of evaluating potential changes,” which means it is likely going to cut debit rewards programs for customers as well.

Paying even more for a financial reform to work

The Dodd Frank Act is going to cost $1 billion a year, reports USA Today. This was shown in a report released by the Government Accountability Office. There has already been lots of debate over the Consumer Financial Protection Bureau being created. Over 2,000 new employees would be needed to enforce laws, including the CFPB, in accordance with Government Accountability Office estimates. Republicans believe the agency will have too much authority. This side of the argument has been openly expressed. The special adviser to the president in charge of setting up the agency, Warren, has defended the agency, saying the “Wall Street behemoths” that created the need for the agency should be targets, not the CFPB, according to Bloomberg. Both personal loans and credit cards will be monitored by the agency. It will be in charge of customer financial goods.

Availability of credit to customers

The financial reform laws are ones that are intended to protect consumers. Financial institutions will not be able to trick consumers into anything anymore. That is a noble aim, however it appears to be having a chilling impact on financial institutions. This has brought on debit card rewards and frees checking to disappear. banks need to make up for losses. All of the loan credit will get tighter. This is very likely what will happen. Many debate this. It might not really be worth it in the end.

Articles cited

CNN

money.cnn.com/2011/03/25/pf/debit_rewards/index.htm

USA Today

usatoday.com/money/economy/2011-03-28-financial-overhaul.htm

Bloomberg

bloomberg.com/news/2011-03-25/warren-says-consumer-bureau-foes-should-look-at-bank-behemoths-.html