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Fast Facts: DEBIT PRICE CONTROLS 1 YEAR LATER

FACT: The Durbin Amendment, a provision of the Dodd-Frank Act, directed the Federal Reserve to set price controls on debit interchange fees, (what retailers pay to accept debit cards at the register). FACT: On October 1, 2011, the Durbin Amendment went into effect, capping debit interchange fees at 50% their previous levels. A diverse group of independent voices spoke out against the rule because of its negative impact on consumers, including the NAACP, National Education Association, Hispanic Chamber of Commerce, Americans for Prosperity, Consumer Federation of America, Black Chamber of Commerce, Redstate, National Taxpayers Union, and National Community Reinvestment Coalition.

FACT: One year later, the Durbin Amendment has resulted in significant savings for retailers. $9.4 billion was transferred from financial institutions to merchants, according to a Card Hub study. The average savings per merchant was $260.24 for every $100,000 of signature debit and credit card volume processed, according to a Heartland Payment Systems Survey. Washington DC merchants received the highest average savings of $333.94, according to a Heartland Payment Systems Survey.

FACT: However, as economists and academics predicted, retailers have not passed along the full savings to consumers. 41% of merchants report they do not intend to pass on lower debit card costs to consumers, according to a DRF Survey. 72% of consumers believe retailers will not pass on savings, according to an Ipsos Survey. Retail prices actually have increased 1.5% since the passage of the Durbin Amendment, according to the Electronic Payments Coalition.

FACT: Instead, consumers have experienced higher banking costs, as financial institutions seek to recoup lost revenue. 54% of institutions are looking to re-structure or terminate rewards programs due to Durbin, according to Pulse Networks 2011 Debit Issuance Study. 60% more noninterest checking accounts carry fees and balance requirements than they did in 2010, according to a Bankrate Checking Account Survey. 30% of banks already have terminated their debit reward programs, according to a Bankrate Checking Account Survey.

September 2012

Elimination of fee incomes through Durbin and limitations of overdraft fees are hurting community banks. Noninterest income helps provide many banking products and services for consumers, according to Ignacio Urrabazo, Commerce Bank President and CEO. The Durbin Amendment will cause some of the smaller institutions to cease offering debt cards to their consumers, according to Cliff McCauley, Senior Executive VP of Frost Bank. Banks and credit unions will pass on much of the reduction in interchange fees to consumers and small businesses in the form of higher fees or reduced services, according to Drs. David S. Evans, Robert E. Litan, and Richard Schmalensee.
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September 2012