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Pulse: Debit Issuer Study

The 2011 Debit Issuer Study, commissioned by PULSE, finds that small debit card issuers, including community banks and credit unions, on average expect a 73 percent decrease in debit interchange revenue as a result of pending interchange fee rules. While these issuers with less than $10 billion in assets are exempt from the regulations proposed by the Federal Reserve Board, they are critical of the interchange cap and skeptical that the exemption will be effective.
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Moody’s Investor Service: New Debit Rules Hurt Banks and Reshape the Payment Processor Market

This report from Moody’s examines the effects of the Durbin amendment on banks and payment processors. The report speculates that Durbin amendment’s reform of debit interchange and routing practices hits banks the hardest and makes payment processing more competitive. Merchant acquirers and retailers are benefiting from the rule changes and there is substantial evidence that they will not pass savings along to consumers. Despite the blow to banks, Moody’s expect them to attempt to offset the lost revenue by raising fees for other products and cutting expenses, though this process will be difficult and the timing is unclear.
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Gas Retailers Gained a $1 Billion Subsidy from Durbin Amendment

New data finds that gas retailers are saving a $1 billion annually at the expense of consumers, thanks to the so-called “Durbin amendment,” a provision of the Dodd-Frank legislation which capped what retailers pay to accept debit cards beginning in October 2011.  According to the U.S. Energy Information Administration, nearly 134 billion gallons of gas were sold in 2011, with approximately 48 billion gallons purchased using debit – the type of payment impacted by the Durbin amendment, which reduced interchange rates by about 70 percent for this category.
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Where’s the Debit Discount?

The research presented in this document sought to identify evidence that retail customers are not seeing any benefit from these price controls. This exercise compared identical baskets of goods before and after the October 1st implementation of the Durbin amendment, through a total of 84 shopping trips at 21 retail locations of four major national retail brands in six diverse U.S. cities. Our field research found no evidence of any savings being passed along to consumers in the form of lower prices as a result of the Durbin amendment price controls. Of the 21 retail locations studied, 16 locations – 76 percent – either raised prices or kept them the same before and after the Durbin amendment went into effect. Just five stores lowered their prices after October 1st. Overall, customers paid an average of 1.7 percent more for the same products after the Fed rule was implemented.
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