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New PPI Report Uncovers Billions in Hidden Costs from Federal Debit Fee Cap

• December 11, 2025
• Robert J. Shapiro
• Jerome Davis

WASHINGTON — A new report by the Progressive Policy Institute (PPI), finds that the Federal Reserve’s cap on debit card interchange fees failed to deliver savings for consumers and instead reduced access to free checking, led to higher maintenance and overdraft fees, and pushed billions of dollars in spending toward higher fee credit cards.

The report, “The Unanticipated Costs and Consequences of Federal Reserve Regulation of Debit Card Interchange Fees,” authored by Robert Shapiro, PPI co-founder and Chairman of Sonecon, and Jerome Davis, Senior Data Analyst at Sonecon, provides the most comprehensive analysis to date of the effects of the 2011 regulation created under the Dodd Frank Act. Drawing on more than a decade of data and scores of previous studies, the authors demonstrate that the policy did not lower retail prices and ultimately left many working Americans worse off.

“Congress expected that capping debit interchange fees would decrease costs for families who rely on debit cards for everyday purchases,” said Shapiro. “The opposite happened. Banks recovered lost revenue by raising account fees, and consumers shifted toward credit cards with higher interchange costs. Despite the intentions of the provision’s sponsors, consumers lost, most merchants lost, and the changes in bank fees produced new financial pressures for lower and moderate-income and many middle-class households.”

Key findings from the report:

• The debit fee cap failed to deliver consumer savings. Merchants did not lower prices, and early surveys show fewer than 2% passed through any savings while most made no change or raised prices.
• Giant national retail chains captured most of any savings by merchants. Large retailers accounted for 73% of all purchases- becoming the main beneficiary of interchange fees.
• Banks offset lost revenues from the capped interchange fees by raising consumer account costs. Covered banks sharply reduced free checking, increased maintenance and overdraft fees, and raised minimum balance requirements, with lower income households bearing the greatest burden.
• Growth in higher fee credit card use erased most merchant savings. Banks shifted incentives to credit cards with unregulated interchange fees, and by 2022 these shifts offset 67% of merchants’ debit fee savings.