When the Durbin Amendment imposed price caps on the fees that banks can charge merchants when a merchant takes a debit card transaction, it also gave the Federal Reserve the power to adjust those price controls periodically. Now the Federal Reserve is posed to re-examine those price controls at an upcoming meeting.
More than ten years after the Durbin Amendment was enacted, consumers have yet to benefit from the lower prices retailers promised. In fact, studies have found that consumers have actually lost more than they gained from this government-imposed price control.
Rather than save consumers money as promised, merchants pocketed the savings they reaped from the government price cap, while community banks lost a revenue source to support important consumer benefits like free checking and debit rewards. This limits investments small community banks can make in staying competitive in a fast-moving payments landscape and their ability to provide the best financial products to meet customers’ needs.
Further caps on interchange will only serve to continue making banking more expensive for consumers as it becomes more costly for banks to provide consumers product offerings.