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CUNA in American Banker: Merchants, Not Consumers, Benefit from Debit Change
Thursday, February 25, 2016 6:45 AM

Retailers have kept most of the revenue—an estimated $32 billion—from price controls implemented by debit card restrictions, a direct hit on consumer pocketbooks, the Credit Union National Association and its trade association partners said in op-ed piece published Wednesday in American Banker.

“Retailers who claim that restrictions on debit card fees benefit credit unions and community banks miss the point: these price controls are bad for consumers,” said the op-ed, signed by CUNA President/CEO Jim Nussle; Camden Fine, president/CEO of the Independent Community Bankers of America; and B. Dan Berger, president/CEO of the National Association of Federal Credit Unions.

“After Congress passed the Durbin amendment, which was authored by Sen. Dick Durbin as part of the 2010 Dodd-Frank Act, merchants promised to pass the savings on to consumers in the form of lower prices,” the article continues.

“The price controls lawmakers were able to impose on those providing electronic payment options have resulted in an $8 billion annual handout to retailers that they have not passed on to consumers. Five years after the Federal Reserve issued a rule to implement the amendment, retailers have kept most of this revenue—an estimated $32 billion—for themselves.”

The op-ed cites a recent Federal Reserve Bank of Richmond study, which indicates that the amendment is not benefiting consumers as Congress intended. The report found that “few merchants are found to reduce prices or debit restrictions as debit costs decrease.”

“Unlike merchants, financial institutions do not simply pocket interchange revenues,” the trade associations continue. “Rather, financial institutions support a global payments network and invest in developing the latest security technologies, such as real-time predictive analytics, EMV, tokenization, biometrics and end-to-end encryption, to help keep consumers’ data safe.”