NEW YORK (MainStreet) – Students of the “law of unintended consequences” were anxious after Congress passed the “Durbin Amendment,” a provision of the Dodd-Frank Wall Street Reform Bill of 2010.
A last-minute addition to the bill, the Durbin Amendment capped the amount of interchange fees card carriers could charge merchants and retailers.
In essence, the Durbin Amendment, which took effect on Oct. 1, cut the rate retailers pay for debit card transactions by 50% (in industry terms, those fees are also called ‘swipe” fees).
Some consumer advocates feared that consumers would bear the brunt of the bill. Given the financial laws of nature, banks would surely make up the difference lost in other service areas, like cutting free checking services, or eliminating debit and credit card rewards programs.
But one professional group with a horse in the race says that just isn’t so.
The Washington, D.C-based Merchants Payments Coalition released a position paper today, citing data from a USA Today article that indicates consumers may be getting the best of the deal in a post-Durbin world.
Calling some allegations about heavy consumer costs “myths” associated with “hidden and exorbitant” swipe fees, the coalition says consumers are at the front of the line in beneficiaries from the Durbin Amendment.
“First, consumers are saving from debit reform,” says the association. “Public reports for America’s largest retailers show that operating margins fell in the fourth quarter of 2011, when the Durbin Amendment to the Dodd-Frank financial reform law reduced debit card fees. That means those retailers were passing along any savings they might have, and then some. And some companies are giving discounts specifically for using debit cards, including, among others, Ikea, Nice N' Easy Grocery Shoppes and some Exxon and Arco stations.”
The group says, despite some anxieties among banking consumers, free checking is not only not going away, it’s growing in numbers. The association says that more banks are offering free checking accounts to customers than before Oct. 1, when Durbin kicked into gear (with 39% of banks offering free checking compared to 35% before the amendment).
Furthermore, checking account fees at big banks are actually in decline, falling from an average of $11.75 to $11.28 over the same time period. In addition, the minimum balance floor needed to avoid checking fees slid from $412 in 2011 to $391 in 2012.
The coalition says retailers are getting into the act, too. Starbucks is offering discounts to consumers who buy goods with a debit card.
For example, a consumer who buys a lot of coffee might receive points that can be used to get a discount at Starbucks. And customers who use debit cards to pay for products at Ikea get an automatic discount on their next purchase.
Consumers may not want to get too excited. The ink is barely dry on the Durbin rule, and banks are likely weighing the financial impact before making any big changes in services and fees.
So too are retailers, who are accused of not passing along the savings from swipe fees to customers. But if current conditions hold steady, consumers may not feel the pinch from the Durbin Amendment that many consumer advocates expected.
In an economy sliding sideways, at best, that’s got to be good news for consumers.