Durbin Rule Takes From Consumers in the Store and the Bank
NEW YORK (TheStreet) -- With all eyes on Washington, D.C., this week, it's not exactly a surprise to Americans that, once again, the nation's politicians just can't get their act together.
But if you need another reminder that the political elite is in over its head, consider the debit card interchange fee resulting from the Dodd-Frank financial reform bill.
The fee legislation part of Dodd-Frank, also known as the Durbin Amendment, established government price controls on the fees bank and credit card companies could charge on debit cards. During the debate on the Durbin provision, major retailers who testified on Capital Hill in favor of the fee caps promised that any savings culled from the legislation would be passed on to customers.
Those "savings" weren't exactly chicken feed. The Electronic Payments Association estimates that U.S. retailers have earned $8 billion from the fee caps in the first two years since the Durbin rule was enacted.Upon the two-year anniversary of the amendment, though, little if any of that $8 billion has actually been passed on to consumers in the form of lower retail prices. The Washington, D.C.-based association says 81% of all U.S. retailers have kept the savings earned from lower debit card fees, either raising prices or keeping them the same. Retail customers have paid, on average, 4.3% more for such things as milk, blue jeans and motor oil.
- Milk prices at Walgreens (WAG) have risen 30 cents in the past year.
- A jar of peanut butter at 7-Eleven has risen by 20 cents in the past year.
- The cost of a hammer at Home Depot (HD) has risen $4.98 in the two years since the Durbin rule went into effect.
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