Don’t Let the Banking Borgs Fool You

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Doug Kantor joined NACS as its General Counsel in May 2021. Prior to that, Kantor most recently served as a partner at Steptoe & Johnson LLP. In this role, he worked with a range of clients, including the NACS government relations team, to define effective policy-based solutions to public policy issues ranging from fuels to financial services. Kantor also established and administered coalitions of companies and trade associations that share common legislative and regulatory objectives. During his tenure at Steptoe, Doug served as counsel to the Merchant Advisory Group, Society of Independent Gasoline Marketers of America, National Grocers Association, Merchants Payments Coalition, and Main Street Privacy Coalition, among other groups.

“Resistance is futile.”

So goes the campy, oft-imitated mantra of the Borg from Star Trek. The idea was to scare everyone into submission and cause them to lose all hope. For viewers, of course, it was great fun as we always knew that our heroes would refuse to be “assimilated” and silence the Borg’s trash talk.

Bank industry lobbying has long adopted “resistance is futile” as its strategy for dodging sensible regulation. Rather than being dismissed as campy nonsense, however, too many smart people have decided that the bank lobby is right – that resistance is indeed futile (see How Fed Debit Card Regs Could Drive Debanking).

The Borg was wrong then. The bank lobby is wrong now.

Banks… Find a Way

The bank lobby decided years ago that the rationale for pro-consumer laws and regulations would melt away if they could convince everyone of the following: Any lost revenue due to regulation will force banks to grab more money in other areas of their business. This was typically paired with the cynical strategy of claiming that the new money grab would come straight from the poorest Americans. That way, deciding not to regulate would be an act of altruism. After all, who would want poor people to pay more?

Once you understand the bank lobby’s strategy, you see it everywhere. End abusive fees? Dear me, you’ll just hurt the people you want to help, they said about the Credit CARD Act of 2009.¹ Regulation of overdraft fees? Heavens, you can’t do that, or the banks will have to charge people higher monthly fees.² Regulation of the highest debit card swipe fees in the world? You get the same banking industry retort.³ Higher bank capital requirements? Banks will have to restrict lending and hurt the people you are trying to help.⁴

The banks ran the same stale playbook to fight virtually every type of policy proposal they faced to rein in their consumer-unfriendly practices in 2009-2010.⁵ They also blamed regulation of debit card fees back then for price hikes – even before limitations on debit fees went into effect (and ignoring that they had already blamed the financial crisis and overdraft regulations for the same price hikes).

As the economist Hal Singer explained, the idea underlying all this is that banks have an inalienable right to their current levels of profit and nothing anyone can do will change that.⁶ Regulation will just increase profit-taking in other areas. But if banks could take more in another area, they already would. It doesn’t matter how much anyone allows them to make in, say, overdraft fees, because the banks will still push for higher monthly fees, other penalty fees, interest charges and the like. 

Calling your Margins

The first clue that the bank lobby’s favorite argument doesn’t work comes from  comparing profits across industries. Banks make higher profits than any other industry (30.89%) and they have been at or near the top consistently for many years.⁷ 

Why do banks have an automatic right to higher profit margins than Big Oil, Big Pharma, Big Tobacco, and even Wall Street investment banks? They definitely do not want to answer this question. That would be very embarrassing, politically. Banks could do very well with lower profit margins. 

The banks’ claims have been debunked specifically with respect to credit and debit card swipe fees charged to merchants. The European Commission’s Directorates for Competition and Financial Services comprehensively studied the European industry. The Commission found “no economic evidence” to support arguments from card issuers and networks that high swipe fees benefit consumers or that lower interchange fees would result in higher fees to consumers:

Federal Reserve economists have found that, in fact, banks collect higher interest and fee payments from people who use cards with higher swipe fee rates. If high swipe fees on merchants were reducing consumer fees or rates,⁹ customers with high swipe fee cards would see the benefit – but they don’t.  And, the higher interest is in addition to the $6.4 billion in annual fees (often paid by rewards cardholders) that banks collected.¹⁰

Australia has the longest history in the world of regulating the fees that banks charge merchants to accept debit and credit cards. The Reserve Bank of Australia has found a clear track record of success with those reforms that belies the banking industry’s lobbying messages. Reviewing the interchange reforms instituted there, the Reserve Bank concluded that cardholders benefitted from swipe fee limits by getting lower interest rates because the whole credit card scheme became more transparent, and the market reacted to make interest rates more competitive.¹¹

Experience in the United States confirms what regulators in Europe and Australia have found. As swipe fees skyrocketed over the past few years,¹² consumer interest rates on credit cards moved in the same direction.¹³ In fact, more than one in three credit cards had interest rates of 30% or more.¹⁴ And, financial institutions across the nation paid average interest rates on savings accounts of . . . 0.46%.¹⁵ The nearly $1,200 per year in swipe fees that the credit card industry brings in from the average American family does nothing to help prevent those same financial institutions from taking every penny they can directly from consumers. And, there is nothing in the bank lobby strategy that should make anyone doubt that the Federal Reserve should finalize its proposed rule and reduce debit swipe fees.

So, what’s the right response to the banks’ “resistance is futile” arguments? Well, Star Trek already taught us the answer: resistance isn’t futile, it’s our only choice. Resist away, with full confidence that limiting the banks’ abuses on debit, credit, fees and the like won’t harm consumers. Don’t buy the bank lobby nonsense. Do not be assimilated.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

^[1] “The Same Old Song,” Americans for Financial Reform at 3-4 (Oct. 2017) (available at Same-Old-Song-Oct-11.pdf)

^[2] “Banking Associations Warn New Overdraft Rule Could Harm Consumers,” Banking Exchange (Feb. 17, 2025) (available at Banking Associations Warn New Overdraft Rule Could Harm Consumers - Banking Exchange).

^[3] Consumer Bankers Association website: Facts Matter: Further Restrictions on Debit Interchange Fees Will Harm Consumers Most - consumerbankers.com

^[4]  Why Big Banks (and Some Odd Allies) Oppose a Plan to Protect Banks - The New York Times

^[5]  Is Free Checking on its Way Out? CNNMoney.com (July 2, 2009), available at http://moremoney.blogs.money.cnn.com/2009/07/02/is-free-checking-on-its-way-out/ (“Bank customers used to the perks of free checking accounts -- unlimited check writing, online banking, debit card use and ATM access, to name a few -- might have to recalibrate their expectations soon. That's because overdraft fees, which banks use to subsidize the expense of free checking accounts, have been under fire by consumer advocacy groups.”).

^[6]  “The Lie Banks Use To Protect Their Late-Fee Profits,” by Hal Singer, The Lever (March 20, 2024) (available at The Lie Banks Use To Protect Their Late-Fee Profits).

^[7] “Margins by Sector (US),” New York University Stern School (Jan. 2024) (available at Operating and Net Margins).

^[8] European Commission, Directorates on Competition and Financial Services, Competition: Final report on retail banking inquiry – frequently asked questions, Jan. 31, 2007, available at http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/07/40&format=HTML&aged=0&language=EN&guiLanguage=en.

^[9] Sumit Agarwal, Andrea Presbitero, Andre Silva, and Carlo Wix, “Who Pays For Your Rewards? Redistribution in the Credit Card Market,” Federal Reserve Board, Finance and Economics Discussion Series (Dec. 2022) at 11, 16-17 (available at Who Pays For Your Rewards? Redistribution in the Credit Card Market).

^[10] “The Consumer Credit Card Market,” Consumer Financial Protection Bureau (Oct. 2023) at 63 (available at 2023 Consumer Credit Card Market Report).

^[11] Payments System Board Annual Report, Reserve Bank of Australia, 2005 at 14.

^[12] “Credit and Debit Card Swipe Fees Reach New Record in 2024,” by Angela Hanson, Progressive Grocer (March 19, 2025) (available at Credit and Debit Card Swipe Fees Reach New Record in 2024 | Progressive Grocer).

^[13] Average interest rates that banks charge consumers on credit cards grew to 27.82% at the end of 2023. Michelle Black and Robin Saks Frankel, “What is the Average Credit Card Interest Rate This Week? December 18, 2023,” Forbes Advisor (Dec. 18, 2023) (available at What Is The Average Credit Card Interest Rate? – Forbes Advisor).

^[14] “Average Credit Card Interest Rates in America Today,” Lendingtree (Dec. 14, 2023) (available at Average Credit Card Interest Rate in America Today | LendingTree).

^[15] Casey Bond, “Good News: The average savings account interest rate is still on the rise,” Fortune (Dec. 18, 2023) (available at What’s the average savings account interest rate for 2023? | Fortune Recommends).

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