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On the Third Anniversary of the Durbin Amendment, 94% of Consumers Not Seeing the Savings Retailers Promised Them
WASHINGTON, DC – October 1, 2014, marks the third anniversary of the implementation of the Durbin amendment, a piece of legislation that was masked as reform, but was nothing more than an $8 billion annual windfall for retailers. While retailers promised they would pass along savings to consumers – savings that now amount to over $24 billion for retailers – a new survey shows that 94% of consumers have seen prices that have increased or remained the same over the past three years. This survey, conducted in September 2014 by Phoenix Marketing International and sponsored by the Electronic Payments Coalition, asked 3,400 consumers about price changes they have observed at a variety of retailers. The research shows that 94% of consumers have seen prices increase or remain the same in the 16 individual point-of-sale categories measured in the survey, and a majority of consumers have seen prices increase at pharmacies, … Continue reading
Despite $1 Billion Annual Subsidy for Gas Retailers, Consumers Seeing No Relief at the Pump This Summer
Despite $1 Billion Annual Subsidy for Gas Retailers, Consumers Seeing No Relief at the Pump This Summer Payment Networks Voluntarily Capped Charges, But Retailers Pocketed Windfall Profits Washington, DC – July 31, 2014 – This summer, Americans are facing average retail gasoline prices of around $3.61 per gallon. Unfortunately, despite the strain that these high prices place on consumers, there is still no evidence that gas retailers are passing on any of the roughly $1 billion annual subsidy they receive from the Durbin amendment on to consumers in the form of lower prices. “Retailers convinced Congress to lower debit interchange fees by promising they would pass the savings onto consumers yet there’s no evidence consumers are seeing lower prices,” said Jeff Tassey, Executive Director of the Electronic Payments Coalition. “Likewise, Payment Networks voluntarily capped the fees that they charge gas retailers on fuel transactions in the hope that doing so would … Continue reading
University of Chicago Law School Analysis Finds Consumers Will Lose $22 Billion as a Result of the Durbin amendment Nearly three years after the implementation of the Durbin amendment, consumers have yet to see the savings that retailers promised. Instead, they are paying the same or higher prices for goods and services and more in consumer banking costs. An analysis by University of Chicago Law School economists David S. Evans, Howard Chang, and Steven Joyce entitled “The Impact of the U.S. Debit Card Interchange Fee Regulation on Consumer Welfare: An Event Study Analysis” quantifies just how much consumers are expected to lose, rather than gain, from The Durbin amendment. The paper analyzes stock prices to determine the impact to consumers from the Durbin Amendment. The analysis finds that retailers gained a $7 billion yearly windfall starting in 2011 as a result of the Durbin amendment. At the same time, consumers … Continue reading
The Federal Reserve Bank of Richmond published the report “Debit Card Interchange Fee Regulation: Some Assessments and Considerations” in the third quarter 2012 issue of Economic Quarterly. The report analyzes the debit card interchange fee regulation introduced by the Durbin amendment and its first-year impact on different players in the debit card market. The report specifically notes the unintended consequences of the Durbin amendment on small-ticket sales and rising bank fees.
The survey found that 72 percent of credit union checking accounts remain free and 39 percent of bank checking accounts remain free. The article notes that one reason for the difference may be that most credit unions aren’t subject to the Durbin amendment, which has resulted in a loss of revenue for many institutions. The author explains that checking account fees have been used as a way to make up for those revenue losses.
Four financial services associations issued a letter to Congress on the eve of the one year anniversary discussing the contents of a new GAO study about the impact of Dodd-Frank. The study shows that for smaller community banks and credit unions, which were supposed to be “exempted” from the fallout of this legislation, interchange revenue dropped by five percent in just the first three months of implementation, and that was before the network exclusivity and routing provisions took effect in April 2012. These provisions require financial institutions to enable their debit cards with two unaffiliated payment card networks which will likely cause even more substantial reductions in interchange fees to exempt issuers. The GAO further concludes that even more harm to community banks and credit unions is likely as the marketplace evolves.
The survey found that the costs of checking have risen dramatically, with some bank fees rising 25 percent or more. The survey finds that the rise in fees is, in part, a result of recent regulations limiting overdraft fees and capping the cost of debit card interchange fees. According to the survey, only 39 percent of banks offer a checking account with no minimum balance requirement and no monthly checking fee, down from 45 percent in 2011.
The 2011 Debit Issuer Study, commissioned by PULSE, finds that small debit card issuers, including community banks and credit unions, on average expect a 73 percent decrease in debit interchange revenue as a result of pending interchange fee rules. While these issuers with less than $10 billion in assets are exempt from the regulations proposed by the Federal Reserve Board, they are critical of the interchange cap and skeptical that the exemption will be effective.
Government Barriers to Georgia’s Growth: How Dodd-Frank Price Controls Poach the Peach State’s Prosperity
This study from the Georgia Public Policy Foundation examines the effects of the Dodd-Frank Act on the Georgia economy. Georgia has been disproportionately affected by the financial crisis and this study finds that legislation, including the Durbin amendment, is making it increasingly harder for the economy to rebound.
This report from Moody’s examines the effects of the Durbin amendment on banks and payment processors. The report speculates that Durbin amendment’s reform of debit interchange and routing practices hits banks the hardest and makes payment processing more competitive. Merchant acquirers and retailers are benefiting from the rule changes and there is substantial evidence that they will not pass savings along to consumers. Despite the blow to banks, Moody’s expect them to attempt to offset the lost revenue by raising fees for other products and cutting expenses, though this process will be difficult and the timing is unclear.