Reduce liability for losses on commercial accounts by adhering to four requirements.
Winners and Losers Are Emerging
We have a winner — and it will come as no surprise to anyone. Just a few days after the Durbin Amendment went into effect on Oct. 1, merchants had already saved about $1.8 million, according to data released by Heartland Payment Systems, one of the nation’s largest payments processors. On Oct 26, Heartland announced that the number had increased to $11,720,068. Then, it announced that in total, from Oct. 1, 2011, to Nov. 9, 2011, it credited its merchants with an estimated $19,529,794 in signature debit interchange reductions. Of these Durbin Dollars, as Heartland calls them, restaurant merchants received $6,171,195, lodging merchants received $846,681 and retail merchants received $2,560,608. Heartland estimates that its average merchant will save more than $1,000 in the first year.
While community banks are not raking in the money as merchants are, contrary to popular belief small banks are not completely losing out either. According to an article in American Banker, earnings at banks with assets of less than $10 billion appear to have been entirely untouched by the cap in the first quarter since its implementation. “Interchange revenue at banks identified as exempt by the Federal Reserve ticked up a few tenths of a percentage point from the third quarter to about $507 million in the fourth quarter,” the article states.
Although the full effect on community banks will not be known for a while yet — at least until the Federal Trade Commission provides its report on how the Durbin Amendment is affecting small banks — for now, it appears community banks are maintaining status quo.
On the losing side are large banks, obviously. Unfortunately, consumers may not be seeing any benefits from the Durbin Amendment either. Merchants claimed they would pass on the savings to consumers but an Electronic Payments Coalition exercise compared identical baskets of goods before and after implementation of the Durbin Amendment, and found no evidence of any savings being passed on to consumers in the form of lower prices. Of the 21 retail locations studied, 16 locations — 76 percent — either raised prices or kept them the same before and after the Durbin Amendment went into effect. Just five stores lowered their prices after Oct. 1.
The winners and losers from the Durbin Amendment are not earth-shattering revelations. But the fact that community banks are not seeing the losses that were initially forecasted is certainly interesting. For more information on the affects of the Durbin Amendment since its implementation, click on the link below.
Kari English is senior editor of BankNews.
Copyright (c) March 2012 by BankNews Media