Is Durbin amendment a success?
Last year an amendment was implemented keeping consumer benefits in mind. It was called Durbin amendment. After the implementation of Durbin amendment, the interchange card exchange fee was supposed to be dropped by 70%. Though it has happened in few cases but its cascaded impacts are making news off lately.
As Durbin amendment was implemented to dent profits of bank as majority of their profits came from interchange fee they charged, banks pressed panic buttons. The first casualty of Durbin amendment was Bank Of America. As the revenue from debit card started dwindling, to compensate the same bank of America announced that it would be introducing a $5 per month charge for its debit card customers. Though ATM withdrawals, mobile phone transfer, bill payments were exempted as they are subjected other levies and fees. To make things worse, Wells Fargo also introduced $3 monthly fee for debit cards and JP Morgan Chase also followed the same course shortly after.
To support and justify new fees, Banks put the blame on Durbin amendment citing that it would result in loss of their revenues and they have to cover up for the losses. This lead to big hue and cry among all Americans and Dublin Amendment was introduced to protect American consumers against all such fees and levies from too-big-to-fail banking institutions like Bank of America. It was done by keeping in mind to increase competition among big banks which were having more than $10 billion in their assets. To keep it fair for common consumers, the power to decide interchange exchange fees was given to Federal Reserve and it was estimated that banks would have $14 billion less revenues on a yearly basis after Durbin amendment which is not a big amount considering their status and financial health.
Though in retaliation to the fees introduced, many customers threatened to switch over to small banks (as Durbin amendment is not applicable to banks having less than $10 billion assets) but sadly such a big exodus has never happened. Another method would be stopping use of debit cards and paying more through in cash, credit cards and checks. May be then, banks would learn lesson that they can’t set their own rules every time if such an outflow of customers happen but until now, it has be concluded that Durbin amendment has flopped and could not achieve what it was supposed to achieve: savings for consumers.
Visit http://www.worldpay.us/Durbin.html to know negative effects of Durbin amendment on consumer’s savings.
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