Carrie and I have both written about the unintended consequences of the “Durbin Amendment” on debit interchange fees – a provision of the Dodd-Frank financial reform bill that was supposed to punish greedy banks.
We were told that the savings would be passed on to consumers. But guess what? Months later, turns out that never happened. A new study from the Electronic Payments Coalition found that retailers have, indeed, saved money… that was not, in fact, passed on. According to the report, “Our field research found no evidence of any savings being passed along to consumers in the form of lower prices as a result of the Durbin amendment price controls. Of the 21 retail locations studied, 16 locations – 76 percent – either raised prices or kept them the same before and after the Durbin amendment went into effect. Just five stores lowered their prices after October 1st. Overall, customers paid an average of 1.7 percent more for the same products after the Fed rule was implemented.”
You may remember when Bank of America tried to recoup their newly-slashed profits from this rule by charging $5 per month. Consumer backlash was so significant that they backed off – but mark my words, fees will rise elsewhere (maybe larger bounced check fees, or fees for not having minimum amounts in accounts).
It’s not surprising that retailers figured out a way around this – after all, they weren’t the ones that Congress wanted to punish! Alas, this is just another example of what happens when the government decides to pick winners (in this case, stores) and losers (banks)… because more often than not, consumers are also losers.