Home Depot Says Debit-Rate Cuts (Indirectly) Reduced Its Customer Prices

The Home Depot Inc., one of the banking industry's fiercest opponents in the battles over interchange regulations, says its customers have benefitted from lower prices after regulators capped debit card swipe fees last fall.

Retailers won a victory last year when the Federal Reserve capped debit interchange, despite a prolonged banking industry campaign to delay or overturn the proposed regulations. Now Home Depot, long one of the most vocal critics of the prices retailers pay to accept debit and credit cards, says its customers are paying less.

Home Depot has lowered its prices for more than 3,000 products since the debit swipe fee caps took effect in October, according to Dwaine Kimmet, the retailer's treasurer and vice president of credit. Those price cuts cannot be directly attributed to the regulations, which were enacted as part of the Durbin Amendment to the Dodd-Frank Act, but Home Depot had lower operating costs as a result of the caps, he said.

"The money saved [by] Durbin goes into the pool of savings, lowers our overall operating costs and allows us to reinvest in the business to lower prices," Kimmet said in an interview. "We have absolutely lowered prices, … [but] what I can't do is draw that direct correlation to Durbin."

Kimmet has said that interchange fees represent Home Depot's third-highest operating cost, after real estate costs for its stores and wages for its employees. The Atlanta-based retailer is still unhappy with the prices it pays for credit card interchange, he said in the interview.

"I don't want to at all take away from Durbin — we're very thrilled about it," Kimmet said. But "bankcard fees have increased when my cost of accepting cash and checks have decreased. … Speaking primarily on the credit side, bank card fees are going up."

Home Depot is actively looking for alternatives to the traditional credit card system in a bid to pay less for accepting payments–and to force the hands of networks Visa Inc. and MasterCard Worldwide, which largely control the interchange system's pricing. The retailer is accepting PayPal's new in-store technology at its registers, and Kimmet says Home Depot is "thrilled with the PayPal relationship" (see story).

A longer version of this story is on AmericanBanker.com.

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