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The Durbin Amendment Turns Three
The amendment prevented banks from charging more than 24 cents per debit card transaction. Before Durbin, banks were charging roughly 44 cents per debit card transaction. In the aftermath of the market crash, congressional leaders thought that this price cap would help struggling consumers. Consequently, champions of the Durbin Amendment declared a victory for the American people. However, AFP opposed the Durbin Amendment. The victory for consumers was falsely proclaimed. Durbin’s amendment was actually a boon to retail companies who wanted the government to force debit card transaction costs downward. This did not change the real price of debit card transactions—that remained at 44 cents. Instead, it artificially lowered the price, leaving banks with a loss of 20 cents per transaction.
Keep Congress, courts away from credit cards
By leaving interchange fees to be negotiated in the marketplace, the settlement maximizes competition among credit-card processors, banks and retailers. Consumers reap the benefits of that competition in the form of lower prices and better services.
Guest Post by Piotr Brzezinski: The Dark Side of the Durbin Amendment
The Durbin Amendment, in particular, looks spectacularly misconceived. By capping the amount banks can charge merchants for debit transactions, Durbin undermined the economics of providing bank accounts to poor customers; although debit interchange fees were unseemly — high profits; low marginal costs — they made it profitable to serve customers who wouldn’t otherwise warrant the cost of attracting their deposits.
In Retrospect, Durbin Amendment Was Flawed From the Start
Merchants also are not passing along whatever savings they’ve derived from the law to consumers, as legislators had hoped. Consumers are actually paying 1.5% more at national retailers than before the Durbin Amendment took effect.
$7.2 billion swipe fees settlement is not enough for some
Why would some class-member retailers complain about a $7.2 billion settlement? It’s the question many are asking after a few retail trade associations and a couple vocal big-box stores urged their fellow merchants to object to the largest antitrust settlement in the history of the United States.
Pro&Con: Toughening price-controls on swipe-fee cards shortchanges U.S. consumers
In the months following adoption of the debit fee caps, several banks announced new, direct fees on debit card use. Other fees are going up too — a just-released study by Bankrate Inc. shows free checking is becoming a thing of the past.
Happy Durbin Day
The Durbin amendment represents an ongoing $8 billion annual transfer from banks’ to retailers’ coffers, but new data confirm that consumers, community banks, and credit unions are the ones who suffer the most.
The Cure for the Banking Industry, Part IV: Why Dodd-Frank Is No Help
“The Durbin amendment on debit card fees is price fixing. It will reduce the availability of banking services to low-income consumers and increase costs for middle-income consumers. This is a government-mandated redistribution of wealth from bank shareholders and consumers to large retailers, such as Walgreens.”
You’ve Been Durbined!
So, next time you visit your friendly ATM or get your bank statement, don’t yell at the banks, just swallow hard and remember that you and the rest of America have been Durbined!
Consumers Are The Winners In The Visa/Mastercard Antitrust Settlement
Consumers and businesses, especially small businesses, benefit when competition and consumer choice decides winners and losers in the marketplace, not politicians. It is time to put the endless interchange litigation and ancillary political efforts to rest
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