Consumers lost billions as a result of Durbin regulation

Economic consulting firm, Global Economics Group, recently released the results of a study exploring the impact of the Durbin Amendment on consumers, retailers, and financial institutions (FIs).

According to the study, consumers have lost between $22 billion and $25 billion as a result of Durbin’s now-overturned interchange fee cap. Following the cap, the average per-transaction interchange revenue fell from 44 cents to 24 cents.

“We found that banks passed some of the revenue they lost on to consumers, and merchants gave back some of the costs they saved to consumers,” said David Evans Global Economic Group’s chairman. Adding, “Unfortunately for consumers, they lost overall.”

Although the study concluded that merchants did pass on to consumers the “minimal” savings they received as a result of the interchange cap, it wasn’t enough to supersede the increases some FIs were forced to instigate to counter lost revenue.

As Evans points out, “The regulations shifted more than $7 billion of money from the annual income of banks to the annual income of merchants. There is no reason to believe that merchants would give this windfall back to consumers or that the banks could absorb the full loss in their profits.”

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