Is the Durbin Amendment working?

The Durbin Amendment to the Dodd-Frank Act, as implemented by a Federal Reserve Board regulation, limits debit card interchange fees in many debit-card transactions. Interchange fees are per-transaction fees imposed by debit-card issuing banks on merchants each time a consumer uses a debit card. The regulation went into effect in October 2011.

The idea of the Durbin Amendment was that interchange fees were excessive. (Excessiveness was blamed on the market power of the two large card networks, Visa and MasterCard.) The proponents claimed that fees harmed merchants, which in turn harmed consumers, because the merchants passed on some or all of the excessive fees to consumers. On average, for covered transactions — there are exclusions — the Durbin Amendment has reduced fees by about half to roughly 21 cents per transaction.

But has the Durbin Amendment benefited merchants in increasing their net revenues and consumers in the form of lower prices for goods and services?

survey study of merchantswritten by Zhu Wang, Scarlett Schwartz, and Neil Mitchell of the Federal Reserve Bank of Richmond — indicates that, in general, the Amendment has benefited neither merchants nor consumers. The authors stress that their findings are preliminary, based on a small sample of merchants, and more in-depth study is needed. 

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