By Martha C. White
One of the most contentious parts of the Dodd-Frank financial reform legislation enacted in the wake of the credit crisis was the Durbin Amendment. You may not know it by name, but you know its primary effect: higher bank fees. It’s also the reason behind those infamous debit card fees banks were threatening to implement last year. Trade groups that pushed for the fee cap said the trade-off would be worth it, because customers would see lower prices in stores. So how’s that working out?
Not so great.
Debit-card interchange fees for the largest banks fell 45 percent in last year’s fourth quarter from 2009 as U.S. caps took effect, according to data compiled by theFederal Reserve.
Average interchange fees for so-called non-exempt issuers, or banks with more than $10 billion in assets, dropped to 24 cents on average during the quarter from 43 cents two years earlier, according to Fed data released today. The shift occurred as limits championed by U.S. Senator Richard Durbin, an Illinois Democrat, took effect.
Average fees received by banks and credit unions with less than $10 billion in assets remained at 43 cents during the fourth quarter, the data show.
US gas retailers are failing to pass on savings from the Durbin interchange fee amendments to customers, effectively pocketing a $1 billion a year subsidy, claims the Electronic Payments Coalition (EPC) pressure group.
The Durbin amendment to Dodd-Frank legislation has seen interchange rates slashed by about 70% for debit card payments for fuel, says the EPC, which is a coalition of banks, credit unions and card networks opposed to the rules.
With high gas prices likely to play a major role in this year’s presidential elections, the EPC has commissioned research from Phoenix Marketing International on the prevalence of debit card use at the pump.
Gas Retailers Gained a $1 Billion Subsidy from Durbin Amendment, With No Evidence of Lowering Gas Prices
New Research Shows Half of All Non-cash Payments for Gas is Debit
WASHINGTON, Apr 16, 2012 (BUSINESS WIRE) — New data released today, by the Electronic Payments Coalition, finds that gas retailers are saving $1 billion annually at the expense of consumers, thanks to the so-called “Durbin amendment,” a provision of the Dodd-Frank legislation which capped what retailers pay to accept debit cards beginning in October 2011. According to the U.S. Energy Information Administration, nearly 134 billion gallons of gas were sold in 2011, with approximately 48 billion gallons purchased using debit — the type of payment impacted by the Durbin amendment, which reduced interchange rates by about 70 percent for this category. However, there continues to be no evidence that retailers are passing along savings from this windfall — even at gas stations, where debit is the overwhelmingly most popular form of payment.
As expected, the legislation to limit debit card interchange fees for banks with more than $10 billion in assets had a significant impact on some of the nation’s biggest banks. In 2011 form 10-K reports to the Securities and Exchange Commission, banks provided loss totals.
- JPMorgan Chase & Co. said annualized net income may be reduced by $600 million because of Durbin limits; the FI said that it may be able to recoup some lost revenue, but likely not all of it.
From: Charlotte Business Journal by Matt Evans, Reporter
The amount of revenue BB&T Corp. took in from debit-card interchange fees dropped dramatically from the third quarter to the fourth quarter of last year as new federal regulations limiting those fees took effect.
David White, a spokesman for BB&T (NYSE:BBT), said check-card fee revenue fell to $42 million in the fourth quarter from $78 million in the third quarter, a decline of 46 percent. The “Durbin amendment” banking-reform law limited the amount banks with more than $10 billion in assets can charge merchants for accepting debit cards to an average of 24 cents per transaction. Before, they had been taking in about 44 cents per transaction.
The Credit Union National Association filed an amicus brief this week in a suit brought by merchant groups against the Federal Reserve’s final rule on debit interchange fees.
CUNA argued in the brief that large and small financial institutions are negatively impacted by the Federal Reserve’s interchange fee cap because the savings and benefits promised by merchants who pushed for the cap have yet to materialize, ATM Marketplace reports.
CUNA also said that the fees are so low that card issues cannot recoup costs or see a reasonable return on their investments. The organization says it plans to join a group of trade associations representing financial institutions.
From: Nation’s Restaurant News
The National Restaurant Association said it joined a lawsuit against the Federal Reserve, claiming that it failed to follow Congress’ intent regarding the amount that banks could charge retailers for accepting debit cards.
The lawsuit argues, among other things, that the Fed’s final rule on debit-card swipe or interchange fees set the rate at a higher level than Congress had intended when it passed the Durbin Amendment in 2010.
The legislation gave the Fed the power to regulate fees for debit cards and directed that it ensure they are “reasonable and proportional” to the cost of processing transactions.