Happy complicated first birthday, Durbin

Oct. 1, 2012, will mark one year since implementation of the Durbin Amendment to the Dodd-Frank Act, and yet the debate over debit card interchange regulation is as contentious as ever. Depending on whom you ask, the Durbin Amendment has lowered merchants' debit card acceptance costs, resulting in savings being passed on to consumers, or it has done nothing of the sort. The Merchants Payments Coalition, which backed the legislation, said retail profit margins have declined since the amendment was implemented, indicating that savings are being passed on to consumers. As an example, the MPC gave the Home Depot U.S.A. Inc, which said lower operating costs due to swipe fee reform led to price cuts on 3,000 items.

The MPC also cited gas stations, where station operators are taking advantage of lower processing costs for debit card transactions by incentivizing customers with discounts to get them to pay with debit cards.

"Debit swipe fee reform has been a win for consumers and Main Street businesses, especially small businesses," said Mallory Duncan, Senior Vice President and General Counsel for the National Retail Federation and Chairman of the MPC. He added that "where fees are lower, prices are lower."

Fees down, but prices up?

But the Electronic Payments Coalition has a far different perspective. The coalition representing the financial services industry said the $8 billion retailers have saved in processing costs over the last year have not been passed on to consumers in the form of lower prices; in fact, consumers are paying on average of 1.5 percent more for goods and services since amendment's implementation.

The EPC conducted field research on the matter. To compare retailers' prices before the amendment's enactment to after, 36 shopping trips were undertaken to 18 stores nationwide, where the same items were bought pre- and post-Durbin. The research showed that, of the retailers visited, 67 percent either raised prices on those same items, or kept prices the same. Breaking down the results by store, the EPC found that, post-Durbin, shoppers paid on average:

• 6.6 percent more for the same items purchased at Home Depot in Atlanta
• 5.4 percent more for the same items purchased at Walmart in Portland, Mn.
• 2.6 percent more for the same items purchased at 7-Eleven in Washington
• 2.9 percent more for the same items purchased at Walgreens in Boston

EPC spokeswoman Trish Wexler said, "With a wink and a nod, giant retailers promised to lower prices for their customers if Congress passed the Durbin Amendment. … Let's just call a spade a spade – this was a political handout to big box retailers, who are now scrambling to make excuses for why they couldn't pass these savings along to customers."

Battling bank rating sites

It is also apparently in the eye of the beholder how the Durbin Amendment has affected what fees banks charge consumers for bank products like checking accounts. The MPC cited new data from Moneyrates.com that shows swipe fee reform did not affect what banks charge for their services. The MPC quoted a representative of the National Grocers Association, who said fluctuations in checking account fees and other fees are "fundamentally the same" post-Durbin as they were pre-Durbin.

However, the EPC said a recent BankRate.com survey found that checking account costs for consumers rose dramatically post-Durbin, "with some bank fees rising 25 percent or more," due in part to regulations limiting overdraft and debit card interchange fees.

To learn more about the arguments on both sides of the Durbin Amendment debate, go to the MPC's www.unfaircreditcardfees.com and the EPCs' www.wheresmydebitdiscount.com .

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