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Study Gas retailers not passing fee savings to consumers
WASHINGTON (4/18/12)--Although gas retailers in the U.S. are saving $1 billion a year through the subsidy provided by the Dodd-Frank Act's interchange fee provision, they are not passing the savings on to consumers, according to a new study from the Electronic Payments Coalition (EPC).

The interchange amendment to the Dodd-Frank Act has seen interchange rates reduced by 70% for debit card payments for gasoline, said EPC, which is a coalition of banks, credit unions and card networks opposed to the interchange rules. Dodd-Frank capped what retailers pay to accept debit interchange beginning last October.

Nearly 134 billion gallons of gas were sold in 2011, with debit cards used to purchase 48 billion gallons, said EPC, citing statistics from the U.S. Energy Information Administration.  "However, there continues to be no evidence that retailers are passing along savings from this windfall--even at gas stations, where debit is the overwhelmingly most popular form of payment," said EPC.

Half of all non-cash payments for fuel are made with debit cards, which account for 36% of all payments including cash, said the coalition, citing new research by the Phoenix Marketing International.  Among households with income of less than $50,000, debit card share of gas station transactions was twice as high as that of credit cards.

"Given that Congress capped debit card interchange fees at around 23 to 24 cents, gas stations are only paying around one to two cents per gallon on a $50-$75 tank of gas. This is roughly 70% of what they were paying six months ago in debit interchange fees--with no evidence of lower prices as a result," said EPC.

"Wherever Congress meddles in an industry debate over who pays what, consumers never win," said Trish Wexler, EPC spokeswoman. "One side gets a leg up and keeps its windfall, while consumers end up footing the bill." She added that "no one is surprised to see that gas retailers are keeping billions of dollars for themselves, while their customers continue to be punished at the pump. Americans should go to their gas stations and demand what's theirs--a discount for debit."

Consumers can compare the costs per gallon and the interchange rates for credit and debit purchases with its Debit Discount for Gas Calculator to determine the amount of savings retailers should be passing on to them at the pump (Use the link to calculate.)  EPC said the average 16 gallon fill-up paid with a debit card at today's gas prices could receive four to five cents per gallon as a discount.

EPC noted that cash discounts are more prevalent in gas retailing, while discounts for debit--the area the interchange amendment is supposed to subsidize--are virtually non-existent. "Unlike a debit discount, cash discounts lure customers away from the convenience of the pump and into the convenience store, where they are lured into buying items with high mark-ups," Wexler said.

The Credit Union National Association (CUNA) has maintained that capping interchange fees would harm consumers by driving up costs of debit cards, limiting their options, and harming competition and technological innovation. Consumers have not seen any pricing benefits for products and services promised by merchants when they argued for the government-set cap, said CUNA.
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