PARK CITY, UTAH –Consumer advocates still aren’t sure if new federal caps on debit card interchange will end up helping or hurting consumers.

“It is too early to predict whether consumers will see some savings as a result of the new fee restrictions,” James L. Brown, a longtime consumer advocate and a retired director of the Center for Consumer Affairs at the University of Wisconsin-Milwaukee, told an audience of bank lawyers on Jan. 9.

New federal caps on debit interchange went into effect in October, slashing the fees that banks can collect from merchants every time customers buy things with their debit cards. The caps were required as part of the so-called Durbin amendment to the Dodd-Frank Act (see story).

Brown spoke here at the American Bar Association’s winter meeting of consumer bank lawyers. During a panel discussion about the Durbin amendment, he called the cap on interchange fees “a price control on financial service providers” and predicted that interchange fees at the new caps “will be substantially lower.”

Debit card issuers “can be expected to try to recoup the lost fees from other sources,” he said, adding that a major problem for banks is that “70% to 80% of bank accounts are unprofitable.”

The interchange-fee cap also will “heighten the segmentation of consumers who can increase spending using credit cards,” Brown said, waving his hand in a large conference room to indicate his audience of well-heeled lawyers, who can afford to use their credit cards and pay them off in full every month.

But other consumers “do not have those options,” Brown said, referring to lower-income or riskier borrowers who may not be able to successfully apply for credit cards or to pay their bills in full every month.

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