When the Durbin Amendment was enacted last September, we were more than a little excited. The new rule reduced by half the fees that banks and card providers could charge merchants for processing debit transactions. And, as any economics major will tell you, this meant that the savings the merchants enjoyed would eventually be passed down to consumers in the form of lower prices on the goods we purchase every day.
But a funny thing happened. It’s been a year since the new rule went into effect, and the prices we pay for merchandise haven’t dropped at all. If anything, they’ve risen. This has led a number of consumer groups to call foul play on retailers.
“Let’s just call a spade a spade,” said Electronic Payments Coalition spokeswoman Trish Wexler. “This was a political handout to big box retailers, who are now scrambling to make excuses for why they couldn’t pass these savings along to customers.”
As you can imagine, the retail industry isn’t taking these accusations lying down. This week, the merchants swung back – by getting their big brother in the payment processing industry to come show us what for. In a new article titled “Consumers Don’t Know the Good News on Durbin Rule,” The Street reports that a major payment processor has now officially stepped in on behalf of retailers to set the record straight.
According to Heartland Payment Systems, consumers really are benefitting from allowing processors and retailers to pocket all the money from the debit swipe fee reduction – we’re just too stupid to realize it.
“While some skeptics claim that savings resulting from the Durbin Amendment have yet to materialize for American consumers, we believe both business owners and consumers are feeling the benefits of lower debit card swipe fees,” says Heartland’s vice chairman, Bob Baldwin.
We suppose that would be fair to say if Baldwin had any hard evidence to support this claim. Unfortunately, Bob doesn’t.
“While it is not possible to prove how much of the savings have ended up in the pockets of consumers,” he says, “we have seen repeated demonstrations that our merchant customers across the country are using the Durbin savings in a variety of ways that are impacting consumers – even though they might not realize they are benefiting from the reform.”
Forgive us for sounding critical, but that sounds like a baseless argument if ever we’ve heard one. These are serious allegations that Bob and his buddies are facing. The reason the Durbin Amendment was passed in the first place was that credit companies and banks were found to be colluding to keep swipe fees on debit cards unfairly high. Now that that’s been taken care of, it appears that retailers and processors are colluding to keep all of the resultant savings for themselves. Does Baldwin expect us to take his word for it that they aren’t? Sorry, but that’s not good enough.
Even more ridiculous are the examples Heartland cites to show how merchants are using their savings “to help consumers.” For example, Heartland reports that “Jon Swede, owner of Po Boys in Tallahassee, FL, recently invested in a new freezer and gave raises to his staff.” We can see how that really helps consumers. Here’s another one: “Tom Bruins, owner of The Original Pancake House in Maple Grove, Minn. has improved the dining experience for his customers by renovating the patio area.” Stop the presses! You’re telling us that we get a new patio? That’s so much better than cheaper meals.
All kidding aside, ladies and gentleman, the only thing Bob Baldwin’s argument proves is that, if anything, the retail and payment processing industries are guiltier than we originally thought. Instead of offering a reasonable defense for their actions, they’re treating consumers like children. They’re brushing off serious allegations with logical fallacies, and their rallying cry is “nuh-uh!”
We’re not in grade school anymore, Mr. Baldwin. It’s time to stop telling stories. There’s nothing illegal about retailers pocketing the Durbin Amendment savings, but don’t act like you’re doing consumers a favor. We’re old enough to know better.