Myth v. Fact

MYTH: Retailers are pocketing money as a result of the Durbin Amendment.

FACT: The current debit swipe-fee structure saved consumers $5.8 billion in lower costs. (Robert Shapiro, “The Costs and Benefits of Half a Loaf: The Economic Effects of Recent Regulation of Debit Card Interchange Fees,” Sonecon, 10/1/13)

MYTH: Repeal of the Durbin Amendment would result in savings for consumers.

FACT: Repeal would result in an $8.5 billion tax on American businesses. This money would go directly into the pockets of the country’s biggest banks.

· “This overall reduction saved consumers and merchants an estimated $8.5 billion in 2012, although some sectors such as supermarkets benefited little or, in some cases, are paying more. We also estimate that $5.87 billion of the $8.5 billion in 2012 savings was passed along to consumers in lower prices, and merchants retained $2.64 billion.” (Robert J. Shapiro, “The Costs and Benefits of Half a Loaf: The Economic Effects of Recent Regulation of Debit Card Interchange Fees,” Sonecon, 10/1/13)

MYTH: The restaurant industry saw sky-rocketing profits since the Durbin amendment was implemented.

FACT: The restaurant industry faced an extremely challenging business environment in recent years, as significant cost pressures were coupled with curtailed consumer spending.

· Food and labor costs — the top two line items accounting for more than two-thirds of restaurant expenses — rose sharply in recent years. Average food costs increased 12 percent between 2010 and 2016, while restaurant labor costs jumped 19 percent, according to data from the Bureau of Labor Statistics (BLS).
· At the same time, menu prices rose at an average annual rate of only 2.5 percent during the six-year period, according to BLS data. This is nearly 40 percent below the 4.1 percent long-term average annual growth rate in menu prices.
· Even though restaurant input costs were rising sharply, debit swipe-fee protections was an important factor in keeping menu pricing stable for consumers.

MYTH: The 2014 survey by the Federal Reserve Bank of Richmond is conclusively accurate.

FACT: The results were inconclusive and not reported because of the extremely small sample size.

· The study’s AUTHORS even acknowledge this: “On the one hand, few merchants in our sample are found to reduce prices or debit restrictions as their debit costs decrease. This is also related to the fact that a relatively small fraction of merchants in our sample reported a decrease of their debit costs in the first place.” (Zhu Wang, Scarlett Schwartz, and Neil Mitchell, “The Impact of the Durbin Amendment on Merchants: A Survey Study,” Federal Reserve Bank of Richmond Economic Quarterly, p. 205)

MYTH: The Durbin Amendment affected all banks — large and small.

FACT: The current debit swipe-fee rate protections only impact banks with assets above $10 billion — not small banks or community banks.

· “There is substantial evidence that the ceiling did lower interchange fees collected by banks with assets above $10 billion, from around 44 cents to about 22 cents per transaction. But there was no such decline for small banks. Furthermore, after the ceiling was imposed, the volume of transactions conducted with cards issued by exempt banks grew faster than it did for large banks. Finally, Zhu Wang shows that interchange revenue fell substantially at large banks after the fee ceiling was imposed but continued rising for small banks.” (James DiSalvo and Ryan Johnston, “How Dodd–Frank Affects Small Bank Costs,” Banking Trends, 2016)

MYTH: The Durbin Amendment hurt the profits of small and community banks.

FACT: Small banks saw their profits increase since the Durbin Amendment was put in place.

· According to a November 29 [Federal Deposit Insurance Corporation] FDIC report, profits at smaller, so-called community banks rose 12 percent for the quarter, bringing income increases for that segment of the industry to 9 percent for the first three quarters of the year. This follows a 10 percent jump in profits in 2015 for the small-bank group. (Press Release, “Net Income Rises to $45.6 Billion at FDIC-Insured Institutions In Third Quarter 2016 Community Bank Net Income Rises to $5.6 Billion,” FDIC, 11/29/16)

MYTH: The Durbin Amendment has resulted in high checking fees for American consumers.

FACT: According to the American Bankers Association (ABA), more Americans have free checking today than they did before the Durbin Amendment passed.

· In 2010, the ABA reported that 53% of consumers had free checking compared to 61% last year. (Press Release, “ABA Survey Shows Majority of Bank Customers Pay Nothing for Monthly Bank Services,” American Bankers Association, 10/7/10) and (Press Release, “Survey: Most Americans Pay Nothing for Bank Services,” American Bankers Association, 8/18/15)