Experts Weigh in on Harmful Effects of the Durbin Amendment

Electronic Payments Coalition | November 9, 2018

 

In the past week, multiple experts have offered insight into the failings of the Durbin amendment since its enactment seven years ago. Here’s what they had to say:

J.W. Verret, associate professor of law at George Mason University, spoke to the measure’s shortcomings for The Hill:

“In 2011, the Federal Reserve adopted rules implementing fee caps on debit card transactions, pursuant to the Dodd-Frank Act of 2010. These rules have led to diminished access to credit products for consumers and have failed in their promise to lower consumer debit fees. The last eight years have shown this to be a failed experiment.

Studies by the Federal Reserve Bank of Richmond demonstrate that the Durbin amendment didn’t even fulfill its intended purpose. Retailers simply kept the cost savings. Thus, the Durbin Act merely reflected a very successful act of lobbying by retailers.”

In The Daily Caller, Andrew Wilford, who is a policy analyst for the National Taxpayers Union Foundation, had this to say about retailer and regulator intervention in the card market:

“After the Durbin Amendment capped debit card swipe fees, a Federal Reserve Bank of Richmond report found that 98.8 percent of retailers either kept prices the same or raised them. And a Federal Reserve Bank of Boston report found that rewards benefits generally exceed any price discounts that retailers can provide for using debit or cash.

While retailers claim their effort to strong-arm credit card providers is pro-consumer, the reality is that the best thing is to keep courts and legislators out of this argument. Credit card companies should have the right to refuse their service to retailers that don’t abide by certain conditions, such as avoiding steering practices and honoring all cards.”

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