How the Durbin Amendment hurt consumers — and why expanding it would hurt more

By Tom Rosenkoetter
ABA Viewpoint

Tom Rosenkoetter is executive director of the ABA Card Policy Council.

In the multi-year debate over debit interchange price caps and the impact on consumers, the evidence is clearer than ever—and retailers have lost one of their favorite talking points.

In a new report released by the Progressive Policy Institute, authors Robert Shapiro and Jerome Davis find that the Federal Reserve’s 2011 cap on debit card interchange fees, better known as the Durbin Amendment, failed to deliver promised consumer benefits, produced significant unintended consequences and ultimately benefited corporate megastores rather than consumers and small businesses. The PPI report reviews the unintended consequences of the Dodd-Frank Act’s last-minute addition and warns that similar proposals to regulate credit card interchange fees — such as those proposed under the so-called Credit Card Competition Act — are likely to repeat these same policy failures.

Shapiro and Davis’s research marks a clear departure from a 2013 report that Shapiro authored on this topic. This earlier report, underwritten by the Merchants Payments Coalition, predicted that the debit card interchange fee cap would generate billions of dollars in savings for merchants, which would then be passed through to consumers in the form of lower prices. For more than a decade, merchant groups have continued to rely on these projections, which subsequent real-world evidence has shown to be incorrect. Moreover, corporate megastores have ignored the litany of recent empirical research conducted by respected think tanks, academics, payment industry experts and state and federal entities showing that, in fact, consumers have been harmed by the Durbin Amendment (see here, here and here).

Notably, Shapiro now explicitly rejects the core assumption underlying his earlier analysis — that interchange fee caps would meaningfully reduce consumer prices by passing through merchant savings. He concludes that this assumption was not supported by real-world market behavior, acknowledging that “with more than a decade of new data and analysis, it is evident that [the promised] consumer benefits never materialized . . . the policy did not lower retail prices and ultimately left many working Americans worse off.” This is just the latest entry in a vast body of research showing that the Durbin Amendment was a flawed experiment that should not be repeated or continued.

Here are some of the most important takeaways from the new study:

1. The electronic payments system is extremely valuable.

Payment cards play a critical role in the lives of consumers, businesses, and the U.S. economy. In 2024, more than 164 billion credit, debit, and prepaid card transactions were processed in the U.S., totaling $11.6 trillion (equivalent to 39% of U.S. GDP). With 90% of U.S. adults holding at least one debit card and 82% owning a credit card, card payments have become essentially ubiquitous among U.S. households. In fact, when prepaid cards are included, 99% of consumers now own a payment card, exceeding the share of consumers with a bank account. Payment cards are safe, reliable, secure and almost universally accepted by merchants around the world and online.

In their report, Shapiro and Davis find that Americans used debit and credit cards for over 150 billion transactions in 2022. Using historical analyses of the time saved by using cards (averaging 16.5 seconds per purchase), they determine that potential time savings in 2022 were over 700 million hours for customers and merchants. At the average American hourly wage of $36 per hour as of April 2025, that equates to more than $25 billion in annual time savings directly attributable to debit and credit cards. The American Bankers Association has long emphasized the consumer and merchant benefits associated with card-based payments, as summarized in the table below.

2. The cap on debit card interchange fees failed to deliver consumer savings.

Despite the substantial system-wide benefits payment cards provide, proponents of debit card interchange fee caps incorrectly argued that these caps would benefit consumers even more through lower retail prices. Citing actual real-world experience, Shapiro and Davis quote from several recent studies that conclude the impact on consumer prices “appears negligible,” with “little evidence” of any consumer savings. In the authors’ own words:

The history of the Durbin Amendment attests that Congress intended to use the cap to help American consumers by shifting part of merchants’ interchange fee costs from merchants to banks, on an expectation that merchants would pass along part or all their savings. More than a decade of evidence and analysis has established that the effort did not result in lower prices for consumers.

3. The Durbin Amendment’s “savings” were mostly seized by the largest retailers.

The PPI report finds that the debit card interchange fee cap generally failed to provide consumer savings. According to the report, one “survey in the policy’s early years found that 77.2% of merchants made no price adjustments, 21.6% responded by raising prices, and only 1.2% lowered prices.” Years later, papers published in 2019, 2024, and 2025 still failed to observe any notable consumer savings.

The report analyzes data on the concentration of American retail and finds that the ten largest retailers account for nearly one-third of U.S. retail sales, and retailers with more than $100 million in annual revenues account for roughly 73% of total retail revenues. The fact that the largest retailers account for the biggest share of sales means that they also pay an outsized share of interchange fees (which are largely driven by sales volume). As such, any savings generated by lower interchange fees naturally flow to corporate megastores, benefiting those firms and their shareholders rather than small businesses. Moreover, the Federal Reserve formula for capping interchange was not designed to produce savings on small-dollar debit transactions, resulting in many smaller merchants seeing little to no benefit.

4. The cap produced significant unintended consequences that harmed consumers.

Not only did consumers get no savings from the Durbin Amendment, they were actually harmed, in measurable ways. After Durbin was implemented, consumers experienced a sharp decline in debit card rewards programs, decreased availability of free checking accounts, higher minimum balance requirements and increased fees. These effects disproportionately affected low-income consumers, who struggled to meet the more stringent minimum balance requirements, were less able to afford higher fees and were more likely to be unbanked or underbanked. As the authors state, “as expected from the economics of two-sided markets, banks . . . responded to regulation that reduced their revenues but not their costs by raising fees and reducing bank services in ways that have left tens of millions of American consumers worse off.”

5. While credit card usage increased and reduced potential debit savings, it largely displaced more costly cash transactions.

Shapiro and Davis identify growth in credit card usage as a key factor limiting the realization of debit interchange savings. However, data from the Diary of Consumer Choice shows that debit card usage across general merchandise, grocery, and convenience stores, and gasoline stations remained largely stable from 2012 to 2024. Importantly, the increase in credit card usage did not come at the expense of debit cards but instead reflected a broader consumer-driven shift away from cash and toward payment methods that offer greater convenience, security and rewards. This transition carries well-documented benefits for both consumers and merchants.

The original economic assumptions underlying the Fed’s Regulation II, which implements the Durbin Amendment, anticipated rapid growth in debit card usage. Instead, growth occurred in credit card transactions for a range of reasons unrelated to debit regulation, including expanded access to credit following the 2008–09 recession, the rapid rise of e-commerce (where credit cards provide enhanced consumer protections), and an increasingly competitive rewards environment. As discussed previously, the consumer-led shift away from cash and toward electronic payments generates substantial net benefits for both consumers and merchants alike — even after accounting for interchange and other fees.

6. Price caps in a two-sided market that do not address underlying cost drivers will fail to produce intended results.

Taken together, the report’s findings highlight a broader issue with regulating interchange fees. As the authors correctly note, the payments ecosystem is a two-sided market: banks (card issuers) are on one side with merchants (card accepters) are on the other. Electronic payment networks are responsible for balancing the two sides by setting interchange fees and other requirements. When the Durbin Amendment lowered one side’s costs (merchants) at the expense of the other side (banks) without reducing underlying costs, it resulted in cost shifting, not cost savings. Banks and economists warned of unintended consequences that would inevitably ensue, such as higher fees and lost rewards, but these warnings were unfortunately ignored.

Conclusion

Shapiro and Davis correctly caution policymakers that similar proposals to regulate credit card interchange fees risk repeating this same core failure — creating yet another wealth transfer from consumers to corporate megastores.

As Shapiro asserts in PPI’s press release, “regulating payments without reducing the true drivers of cost does not make the system cheaper. It moves the bill to someone else — in this case, the very people these policies were intended to help end up paying more.”

The evidence is clear: debit card interchange fee caps distorted the payments ecosystem and failed to deliver promised savings, ultimately harming consumers. Extending similar price controls to credit cards would only repeat these mistakes, at the expense of the very consumers policymakers intend to protect.

ABA Viewpoint is the source for analysis, commentary and perspective from the American Bankers Association on the policy issues shaping banking today and into the future. Click here to view all posts in this series.