The Durbin Amendment, part of the Dodd-Frank Act, was supposed to promote competition by capping interchange fees for payment networks like Visa, mandating merchant choice in processing networks for large issuers. However, the Act’s legacy has been a poor one for consumers.
Nothing about capping fees changes the cost of producing a given service. It simply reduces the revenue stream from that service and redistributes it to counterparties. Research by the Richmond Federal Reserve indicates that those counterparties – retailers – largely pocketed the difference and did not pass along savings to consumers. Worse, debit interchange price controls were estimated to have increased the unbanked population by about 1 million.
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