Dodd-Frank w/ Durbin Amendment: Will it result is lower prices for consumers?


The Dodd-Frank w/ Durbin Amendment did exactly what it was supposed to do. Big banks acted irresponsibly prior to the 2008 financial crisis. Power and money needed to be redirected away from the big banks. You saw that small banks and credit unions converted ex-big bank customers to their banks. Shift of power.

As for lower prices in retail, you have to give it time. Interchange is only between banks. Merchants must go through a payment processor that adds a profit layer on top of interchange. In order for merchants to potentially realize any financial benefit from the Durbin amendment, they need to negotiate new contracts. This will take time as well as necessitating training of employees and possibly the purchase of new POS system. Regardless of the Durbin amendment, merchants are tied to their contracts with payment processors. The payment processors are benefiting from the new laws whenever someone uses a Bank of America, Wells Fargo, or Chase debit card. Until merchants can negotiate new contracts, you will not see an opportunity for lower prices.

Consumers need to give merchants time to adjust to the new law. It is still up in the air whether consumers benefit from all this on the micro level (lower prices). On a macro level, consumers benefit because competition is spread among other banks which create additional perks and distribution in our financial system which creates reliability and safety.