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No Durbin discount detected

By Marcie Geffner · Bankrate.com
Monday, October 15, 2012
Posted: 6 am ET

Retailers have failed to pass along their windfall from caps on debit card swipes to consumers, according to the latest price survey by the Electronic Payments Coalition, or EPC, a group of banking industry associations, major banks and credit card payment networks.

Despite retailers' promises of lower prices, consumers paid 1.5 percent more on average for standard baskets of common household products one year after the implementation of the Durbin Amendment, according to an EPC analysis.

Prior to the Durbin Amendment, the Federal Reserve determined that banks spent 4 cents, on average, to process debit card transactions. The Durbin cap set the maximum debit card swipe fee, paid by the retailer, at 21 cents, plus 0.05 percent of the transaction amount and an additional 1 cent for fraud prevention efforts. Financial institutions with less than $10 billion in assets are exempt from the cap.

The EPC research involved 36 shopping trips to 18 Wal-Mart, Walgreens, 7-Eleven and Home Depot stores in Washington, D.C.; Boston; Atlanta; San Francisco; and Portland, Maine. The consumer prices of items purchased in the last week of September 2012 were then compared to the prices for the same items purchased a year earlier, the week before the Durbin Amendment took effect. This research found that nine retailers raised prices, four kept prices the same and five lowered prices.

On average, shoppers paid:

  • $3.90, or 2.5 percent, more for the same items a year later in Washington, D.C.
  • $2.26, or 5.2 percent, more in Atlanta.
  • $0.80, or 2.7 percent, more in Portland, Maine.
  • $0.43, or 0.8 percent, more in Boston.
  • $2.26, or 4.28 percent, less in San Francisco.

The purchased items included batteries, duct tape, paint, peanut butter, macaroni and cheese, sugar, bread, milk, Bud Light, Coke and Cheerios.

The research is intriguing, but whether the findings demonstrate any true connection between the Durbin Amendment and consumer prices is difficult to discern given the small number of data points and lack of controls for such other factors as inflation and wholesale prices.

Do you think banks are lowering the cost of consumer transactions? Are you paying more for groceries? How are you dealing with those added costs?

Follow me on Twitter: @marciegeff.

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