After getting a nice break on debit interchange fees, the onus is on retailers to extend their savings to consumers through lower prices on goods and services. But, Americans are not reaping the financial benefits, according a field study by the Electronic Payments Coalition.

Debit interchange fees, which are paid to banks by merchants per debit card transaction processed, have been limited to nearly half of the market average in 2010. The change went into effect on October 1, 2011 as part of the Durbin amendment of the Dodd-Frank financial reform law.

Industry analysts estimated that the new rules would result in $8 billion in savings for U.S. retailers. Lobbying for the new debit interchange fee limit was a successful venture for retailers, who vowed to carry over cost savings to shoppers.

However, the EPC did not find that merchants followed up on that promise. “There is no evidence that American consumers are benefiting from the Durbin amendment, despite overwhelming evidence that the retail industry is experiencing significant savings,” the EPC concluded in the report covering its findings.

The research has given birth a website asking retailers: “Where’s My Debit Discount?”

The EPC purchased the same list of items at the same retailers in six cities across the country before October 1st and then on October 15th, November 1st, and November 15th. The retailers included Wal-Mart, Walgreens, 7-Eleven, and Home Depot – which the EPC has noted as having lobbied for the new interchange fee rules.

The EPC found that not only had prices not get slashed, the shopping list actually ended up becoming more expensive at many retailer locations.

Consumers Lost on Both Ends

Obviously, the EPC is trying to point out that retailers are not keeping their word. Rather, merchants “are retaining the benefit from the reduction in this business expense.”

Critics should remember that merchants continue to fork over plenty of change to banks for processing credit cards, which was not affected by the debit swipe rules. But, a study by the Federal Reserve found that debit cards have become the most popular form of non-cash payment in 2010.

The EPC findings are likely to unnerve Americans who’ve lost free checking accounts, sacrificed debit card rewards, and are facing the threat of new/higher bank fees as banks seek to recoup its lost revenue.

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  • Sun W. Kim

    Wow, its only been a few months and this is coming out from the EPC? Bank of America got to whine for over a year on this. Don’t retailers deserve the same kind of time period to make adjustments? Benefits from this law should not only be seen as price. It means some small businesses stay in business. It also means that larger profit margins means the potential for better service. It can’t only be about price. You also see the benefit of the bank industry re-structuring so that power and dollars are distributed more widely. That’s less lobby power, that is less monopolistic behavior… All these points are beneficial to the consumer.

    • More time is definitely needed before judging the retail industry since merchants do not have the liberty of cutting prices before the debit swipe fee caps while banks could raise fees on a whim.

      However, I can see – as a consumer – how difficult it is to perceive the effects from a macro perspective when I am expecting a positive influence in my personal wallet.

      • Sun W. Kim

        In order for a merchant to realize reduced processing rates, the business would need a merchant account with a big bank (BofA, Citi, Chase, etc). Some may already have accounts with them, while others would have to switch. Switching can a big decision as you need to research if your current system and equipment is compatible with the new processor. If not, you would need to perform the cost/benefit analysis such as upgrade cost and training employees on the new system. For some businesses, the lower processing rates may not be worth the overall cost.