A recent report on the impact of the Durbin Amendment revealed that the Dodd-Frank provision has cost consumers between $22 billion and $25 billion.
The controversial Durbin Amendment led the Federal Reserve to implement a cap on the amount a bank can charge to process a card transaction, known as interchange fees. As a result of the cap, average interchange revenue declined from 44 cents to 24 cents per transaction.
The study, conducted by the University of Chicago Coase-Sandor Institute for Law & Economics, found that consumers lost “more on the bank side than they gained on the merchant side.”
“Banks would tend to pass some of their revenue losses on to consumers in the form of higher prices and fewer services,” the study’s authors said. “Consumers are better off if the gains on the merchant side outweigh the losses on the bank side; otherwise they are worse off.”
The study also found that retailers are indeed passing on some of the savings to consumers, despite claims that retailers have retained $7 billion in savings. The savings impact for consumers, however, was minimal—less than five cents on an average transaction, even if retailers passed through 100 percent of their cost savings.
“While retailers are expected to pass on some of their cost savings, that appears to be significantly outweighed by likely fee increases, or reductions in service quality, for checking accounts,” the study said.