Economists at Global Economics Group, a leading economic consulting firm that advises clients around the world, has released a new study examining the impact of the Durbin Amendment on consumers, retailers, and banks. The study finds that consumers will lose more than $22 billion as a result of the price caps on the interchange fees banks receive when consumers pay with a debit card. The authors used an “event study” which is based on modern finance theory.
Dr. David S. Evans, the lead author of the study, noted, “We found that banks passed on some of the revenue they lost on to consumers and merchants gave back some of the costs they saved to consumers. Unfortunately for consumers, they lost overall. The present discounted value of the loss to consumers is between $22 and $25 billion based on our findings.” Evans, the Chairman of Global Economics Group, also holds teaching positions at the University of Chicago Law School and the University College London. He is one of the leading experts in the world on the economics of payment systems. He co-authored the study with Howard Chang and Steven Joyce also of Global Economics Group.
The Durbin Amendment is back in the news as a result of a Federal District Court decision that the Federal Reserve Board had set the interchange fee caps too high to the detriment of retailers. The Federal Reserve Board filed its appeal brief from that decision on October 21. According to the Global Econ study, consumer losses would expand and retailer profits would increase if the Fed were forced to further reduce how much retailers pay when consumers use their debit cards.
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