How The Durbinator Will Affect Customer Wallets

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Well, the votes are in, and the Durbin Amendment — that reduces the debit interchange fee that card issuers get from retailers and merchants — won’t be delayed. Is this good for U.S. consumers?

Not a chance.

Back in December 2010, I posted my analysis of the potential impact that the amendment could have on consumers’ wallets. If retailers and merchants passed on the savings from the interchange fee reduction, the average U.S. household would save $1.86 per week (based on U.S. household’s average weekly retail spend).

Public interest groups heralded this regulatory proposal as a boon to consumers. According to Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group:

“Merchants will be forced by competition to pass their savings [from the fees] along to their customers.”

And according to the National Retail Federation:

“[Retailers] absolutely plan to pass this savings along to their customers. Some might lower prices, while others might instead offer free gift wrapping, or use the savings to hire more sales people.”

My take #1: USPIRG needs a lesson in economics. The percentage of the retail industry’s total cost structure that’s impacted by the reduction in debit interchange fees is minimal. $11 or 12 billion would enable you or I to retire in style, but doesn’t make a dent in the retail cost structure.

Another thing to consider here is that prices are driven by supply and demand, not just cost of raw materials and production. As I told NPR, “if Ferrari could get glass for 3% less than they do now, do you really think they’d reduce the price of a Ferrari by 3%?” The answer is: Not a chance.

My take #2: The NRF’s comment is ridiculous. First off, I don’t want my groceries gift wrapped, and I don’t know how the gas station I go to is going to gift wrap gas.

The last part of the NRF comment is mind-boggingly stupid. Why in the world would retailers hire more sales people? Are more people coming in the stores as a result of this? No. So why would any business hire more people? Answer: They wouldn’t, they won’t, and this is just an example of the stupidity that public interest groups and the NRF think they can foist on the American public.

Bottom line: The American public has been Durbinated. I can only hope that when Durbin and his cronies are up for re-election, the Americans tell them “Hasta la vista, baby!”

p.s. Upon seeing the NPR quote, my wife said “Well, that’s about as close as ‘Ron Shevlin’ is ever going to get to a ‘Ferrari’.” Nice.

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