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Competitive Enterprise Institute |

Interchange Fee Warnings Coming True in EU

We have often warned about the negative effects of interchange fee regulation and specifically a cap on interchange fees. Last year we warned the European Parliament that a proposed EU-wide cap on interchange fees would cause many banks to raise fees and interest rates on all their customers, not just those who use debit or credit cards. We said: Capping interchange fees has been tried in some countries around the world.  Despite claims that these efforts were for the benefit of consumers, the real world results have shown the opposite to be true. In every instance, consumers faced higher fees for banking services, a reduction in benefits and services and saw no return in the form of lower prices from merchants despite promises by merchants and policy makers to pass savings to consumers. We also noted in April that banks were already cutting back on card reward schemes. The negative effects of this arbitrary cap on interchange fees are now being widely felt in Europe and are playing out exactly as we expected. Banks earning less on interest and interchange fees will raise customer fees to compensate for losses in other fields of activity: The first domino to fall was
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Electronic Payments Coalition |

On the Third Anniversary of the Durbin Amendment, 94% of Consumers Not Seeing the Savings Retailers Promised Them

WASHINGTON, DC – October 1, 2014, marks the third anniversary of the implementation of the Durbin amendment, a piece of legislation that was masked as reform, but was nothing more than an $8 billion annual windfall for retailers. While retailers promised they would pass along savings to consumers – savings that now amount to over $24 billion for retailers – a new survey shows that 94% of consumers have seen prices that have increased or remained the same over the past three years. This survey, conducted in September 2014 by Phoenix Marketing International and sponsored by the Electronic Payments Coalition, asked 3,400 consumers about price changes they have observed at a variety of retailers. The research shows that 94% of consumers have seen prices increase or remain the same in the 16 individual point-of-sale categories measured in the survey, and a majority of consumers have seen prices increase at pharmacies, home improvement stores, supermarkets, restaurants and gas stations, among other industries. Furthermore, some 16% of consumers report that some retailers are even imposing surcharges on debit purchases. “These survey results clearly demonstrate that most consumers have not experienced lower prices at the register, which was the consumer promise of the
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Electronic Payments Coalition |

Despite $1 Billion Annual Subsidy for Gas Retailers, Consumers Seeing No Relief at the Pump This Summer

Despite $1 Billion Annual Subsidy for Gas Retailers, Consumers Seeing No Relief at the Pump This Summer Payment Networks Voluntarily Capped Charges, But Retailers Pocketed Windfall Profits Washington, DC – July 31, 2014 – This summer, Americans are facing average retail gasoline prices of around $3.61 per gallon. Unfortunately, despite the strain that these high prices place on consumers, there is still no evidence that gas retailers are passing on any of the roughly $1 billion annual subsidy they receive from the Durbin amendment on to consumers in the form of lower prices. “Retailers convinced Congress to lower debit interchange fees by promising they would pass the savings onto consumers yet there’s no evidence consumers are seeing lower prices,” said Jeff Tassey, Executive Director of the Electronic Payments Coalition. “Likewise, Payment Networks voluntarily capped the fees that they charge gas retailers on fuel transactions in the hope that doing so would lower gas prices for consumers. Unfortunately, gas retailers took all the money and ran—sticking their customers with the bill.” In 2011, Congress passed the Durbin amendment, a provision of the Dodd-Frank legislation, which capped what retailers pay to accept debit cards, reducing interchange rates by about 70 percent; this is
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Consumers Lose Under the Durbin Amendment

University of Chicago Law School Analysis Finds Consumers Will Lose $22 Billion as a Result of the Durbin amendment Nearly three years after the implementation of the Durbin amendment, consumers have yet to see the savings that retailers promised. Instead, they are paying the same or higher prices for goods and services and more in consumer banking costs. An analysis by University of Chicago Law School economists David S. Evans, Howard Chang, and Steven Joyce entitled “The Impact of the U.S. Debit Card Interchange Fee Regulation on Consumer Welfare: An Event Study Analysis” quantifies just how much consumers are expected to lose, rather than gain, from The Durbin amendment. The paper analyzes stock prices to determine the impact to consumers from the Durbin Amendment. The analysis finds that retailers gained a $7 billion yearly windfall starting in 2011 as a result of the Durbin amendment. At the same time, consumers began losing many money-saving banking benefits as a result of the Durbin amendment. These changes set off a series of consequences that ultimately will cause consumers to lose more than $22 billion.
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Federal Reserve Bank of Richmond: Debit Card Interchange Fee Regulation

The Federal Reserve Bank of Richmond published the report “Debit Card Interchange Fee Regulation:  Some Assessments and Considerations” in the third quarter 2012 issue of Economic Quarterly. The report analyzes the debit card interchange fee regulation introduced by the Durbin amendment and its first-year impact on different players in the debit card market. The report specifically notes the unintended consequences of the Durbin amendment on small-ticket sales and rising bank fees.
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BankRate.com |

Bankrate: 2013 Credit Union Checking Survey

The survey found that 72 percent of credit union checking accounts remain free and 39 percent of bank checking accounts remain free. The article notes that one reason for the difference may be that most credit unions aren’t subject to the Durbin amendment, which has resulted in a loss of revenue for many institutions. The author explains that checking account fees have been used as a way to make up for those revenue losses.
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Six Questions Surrounding the Interchange Settlement

Members of the Electronic Payments Coalition remain highly confident that the Court will grant preliminary, and ultimately final, approval for the settlement in the merchant class action suit against the payment card industry – and that this represents the end of a long battle and finally puts all the issues raised to rest going forward.  Recent noise in the press, however, has raised a number of questions as to why we remain so confident in this outcome.  This is an interview with Robert Stolebarger, partner at Bryan Cave LLP and antitrust counsel for the Electronic Payments Coalition, where he addresses some of the most commonly asked questions.
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Bankrate: Checking Fees Rise to Record Highs in 2012

The survey found that the costs of checking have risen dramatically, with some bank fees rising 25 percent or more. The survey finds that the rise in fees is, in part, a result of recent regulations limiting overdraft fees and capping the cost of debit card interchange fees. According to the survey, only 39 percent of banks offer a checking account with no minimum balance requirement and no monthly checking fee, down from 45 percent in 2011.
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2011 FDIC National Survey of Unbanked and Underbanked Households

In June 2011, the FDIC sponsored the second National Survey of Unbanked and Underbanked Households to collect data on the number of U.S. households that are unbanked and underbanked, their demographic characteristics, and their reasons for being unbanked and underbanked. It is hoped that these survey results will help better inform policymakers and the industry about economic inclusion issues, and promote the goal of ensuring that all Americans have access to basic, safe, and affordable bank services.
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