Americans will likely be paying more for their holiday gifts this year, in spite of a new regulation on the amount of money retailers needed to pay to accept debit cards.
According to a report from the Electronic Payments Coalition, a group that seeks to “protect the value, innovation, convenience and competition in today’s growing electronic payments system,” since the passage of a law by Congress lowering the cost to retailers of accepting debit cards, which was heavily lobbied for by large retailers, consumers have not seen the promised lower prices.
“At least 76 percent of retailers included in the research have not passed promised savings to consumers, despite already receiving $825 million in windfall profits from the Durbin amendment,” according to the report.
The Durbin amendment “established price controls on the cost retailers pay to accept debit cards” and was instituted based on the expectation that consumers would see lower prices as a result.
That, however, appears not to have been the case.
The report found that “customers paid on average 1.7 percent more after implementation.” The research conducted involved 84 shopping trips at 21 stores nationwide. The same items were purchased at each store at four different times, first in the last week of September, right before the program was implemented in October, and then on three subsequent dates.
For example, the price of those items at a Wal-Mart in Boston, Massachusetts went up $1.07, or three percent, after the implementation of the rule. At a Walgreens in Little Rock, the cost of the items increased by 73 cents, or 2.9 percent.
Retailers have already seen $33 million in savings, according to Heartland Payment Systems, but that benefit is not transferring to consumers.
“Merchants’ empty promises to pass savings on debit card purchases are coming to light,” said Trish Wexler, spokeswoman for the Electronic Payments Coalition. “More than two months after the Federal Reserve’s rule implementation, customers are actually paying more for the same products – even though retailers are already taking home millions in additional profits. Something is very wrong with this picture.”
The group has launched a website to promote consumer awareness, and also has a video: