Public policy debates in the United States are often framed as efforts to protect consumers from corporate power. However, when policies are designed without adequate consideration of structural inequality, they can unintentionally reinforce systemic racism and deepen financial exclusion. As recently articulated by Paul Weinstein Jr. and Malena Dailey of the Progressive Policy Institute, The Durbin Amendment to the Dodd-Frank Act of 2010 illustrates how a well-intended economic regulation disproportionately harmed low-income households and Black and Brown families by weakening access to affordable banking and financial stability.
The Durbin Amendment capped debit card interchange fees paid by merchants to financial institutions, based on the assumption that lower transaction costs for retailers would translate into lower prices for consumers. While this rationale appeared consumer-friendly in theory, empirical evidence suggests otherwise. Studies drawing on Federal Reserve data indicate that nearly all merchants—approximately 98 percent—either maintained existing prices or increased them after the fee cap was implemented (Muthukrishnan & Williams, 2019). Large retailers largely retained the cost savings, rather than passing them on to consumers.
Banks, faced with reduced interchange revenue, responded by eliminating free checking accounts, reducing debit card rewards, and increasing account maintenance fees. These changes had a regressive impact, disproportionately affecting low-income individuals who rely heavily on basic banking services and have limited capacity to absorb additional costs (Zywicki, Manne, & Morris, 2014). The effects were particularly severe for Black and Brown households, which have long faced structural barriers to financial access.
Systemic racism within the U.S. financial system—rooted in redlining, discriminatory lending practices, and unequal employment opportunities—has resulted in lower average credit scores and higher rates of unbanked and underbanked status among Black and Latino families (Rhine & Greene, 2013). Consequently, these households are more likely to depend on debit cards rather than credit cards for everyday transactions. When banks curtailed free or low-cost checking options following the Durbin Amendment, Black and Brown consumers were more likely to face higher fees or lose access to mainstream financial institutions altogether.
As Mehrsa Baradaran argues in The color of money: Black banks and the racial wealth gap (2017), financial exclusion is not an accidental byproduct of markets, but a predictable outcome of policy decisions that fail to address racial inequality. The Durbin Amendment exemplifies this dynamic. By reducing bank revenue without implementing safeguards for vulnerable populations, the policy incentivized institutions to cut services in ways that disproportionately harmed marginalized communities. For many Black and Brown families, increased fees and reduced banking access led to greater reliance on alternative financial services such as payday lenders and check-cashing outlets, which carry higher costs and perpetuate cycles of economic insecurity.
Meanwhile, the primary beneficiaries of the interchange fee cap were large retailers such as Walmart, Target, and Home Depot. Research indicates that these corporations captured the majority of the financial gains, while consumers and small businesses experienced little relief (Wright, 2012). This outcome reflects a broader pattern in which ostensibly consumer-protective regulations instead reinforce corporate concentration and widen racial and income-based disparities.
Despite the lack of evidence that the Durbin Amendment improved consumer welfare, lawmakers have proposed extending similar price controls to credit card interchange fees through legislation such as the Credit Card Competition Act. This proposal raises significant equity concerns. Interchange fees support fraud prevention, dispute resolution, and access to credit—particularly for consumers with limited financial histories. Reducing these fees is likely to result in higher interest rates, reduced credit availability, and diminished rewards programs (Jambulapati & Stavins, 2021).
For Black and Brown consumers, who already face barriers to affordable credit, these changes could further restrict access to financial tools that help manage expenses and build credit histories. Credit card rewards, often used to offset transportation, grocery, and utility costs, play a meaningful role for many low- and moderate-income families. Eliminating these benefits while tightening credit standards risks exacerbating racial wealth gaps rather than reducing them.
Economists have long warned that price controls frequently produce unintended consequences that harm vulnerable populations. In the case of the Durbin Amendment, the evidence demonstrates that the policy failed to lower consumer prices, weakened access to basic banking services, and disproportionately harmed communities already affected by systemic disadvantage. When viewed through a racial equity lens, the Durbin Amendment illustrates how race-neutral policies can nonetheless generate racially unequal outcomes.
If policymakers are serious about supporting working families and addressing systemic racism, financial regulation must be evaluated based on its real-world effects rather than its stated intentions. Expanding the Durbin framework without addressing its demonstrated failures risks repeating the same inequitable outcomes on a larger scale.
