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The cost to U.S. merchants of taking payment on debit cards declined by more
than $7 billion annually as a result of the Durbin Amendment to the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, while the effective cost
to issuers of providing debit-card services to consumers increased by a corresponding amount. This article reports an event-study analysis of stock prices to determine the impact on U.S. consumers of the Durbin Amendment. Did consumers
gain more from cost savings passed on by merchants, in the form of lower prices
and better services, than they lost from cost increases passed on by banks, in the
form of higher prices or less service?We find that consumers lost more on the bank
side than they gained on the merchant side. Our estimate is that, based on the
expectations of investors, the present discounted value of losses for consumers as a
result of the implementation of the Durbin Amendment is between $22 billion and
$25 billion.
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