Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

News Now

Washington
Consumers paying more post-interchange EPC study
WASHINGTON (10/1/12)--Debit interchange fee cap legislation was promoted by retailers as consumer-friendly policy before it was enacted last year, but consumers actually have paid an average of 1.5% more for certain goods since the interchange fee cap implementation, an Electronic Payments Coalition (EPC) study has found.

Click to view larger image Click for larger view
The Federal Reserve Board's final rule implementing the interchange law capped large issuer debit interchange fees at 21 cents. An additional five basis points per transaction may be charged to cover fraud losses, and an extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.

To gather data on the interchange cap's impact on consumers, EPC researchers made 36 shopping trips to 18 stores across the county, purchasing a consistent list of products at each store. One round of purchases was made in September 2011, just before the interchange cap took effect, and another round was made late last month.

Overall, the EPC found that 67% of retailers visited either increased their prices or kept them the same. Specifically, the EPC found that after the interchange cap implementation, shoppers paid on average:

  • Eighty cents, or 5.4%, more for the same items at a Walmart in Portland, Maine;
  • One dollar, or 2.6%, more for the same items at a 7-Eleven in Washington, D.C.;
  • Thirty cents, or 2.9%, more for the same items at a Walgreens in Boston; and
  • $2.22, or 6.6%, more for the same items at Home Depot in Atlanta.
The EPC noted that these increased prices come as retailers save billions and debit card issuers are forced to make up for lost revenue. "With a wink and a nod, giant retailers promised to lower prices for their customers if Congress passed [interchange legislation]. One year after implementation, retailers have taken home $8 billion while many of their customers pay more at the register," EPC spokeswoman Trish Wexler added. The EPC study was covered in Washington political paper Politico's Morning Money column.

Credit unions and community banks also are being harmed by the interchange regulations, the Credit Union National Association and other finance industry partners said in a recent letter to Congress.

The letter noted that a U.S. Government Accountability Office (GAO) study released last month--which found smaller community banks and credit unions, supposedly "exempted" from the fallout of this legislation-- have instead seen interchange revenue decreases of 5% in the first three months following interchange fee cap implementation.

The letter also noted that credit unions and community banks are struggling to maintain viable debit programs, and have had to raise their fees in some cases. "The GAO further concludes that even more harm to community banks and credit unions is likely as the marketplace evolves," the letter added. (See Sept. 24 News Now story: Interchange cap not helping consumers: CUNA, trades)

For the EPC study, use the resource link.
Other Resources

RSS





print
News Now LiveWire
#BREAKING: @federalreserve offers few new hints on rate-hike timing in policy statement http://t.co/lgZ6zZ1Vrr
48 minutes ago
.@CUNA has posted free, recorded version of its 60-minute Jan. 26 #RBC2 webinar online. http://t.co/jiVPASGQ4C
1 hour ago
April 27 is comment deadline on @TheNCUA's #RBC2 proposal. See @FederalRegister http://t.co/8MkQNTc2rh
1 hour ago
Delaware #CU growth noted in @DeBusinessTimes http://t.co/b11eaQo4CT
2 hours ago
Data security legislation among FTC recommendations #NewsNow http://t.co/2pS3Te1RPS
3 hours ago