Does Bad Research Beat No Research? Durbin Amendment Data

Todd Zywicki, Geoff Manne and Julian Morris have an article on the effect of the Durbin Amendment.  Sigh.  No surprises here.  Zywicki et al. are making claims beyond what their data can support and in fact directly contradicted by their own data, which shows that some of the "effects" of Durbin preceded the enactment and effective date of the Amendment.   

The main data points for the first part of the article come from Bankrate.com's annual checking account survey. Zywicki et al. don't bother to explain the data or methodology in the Bankrate survey. Instead, they just act as if it is authoritative. But here's what the survey covers (for the 2012 survey):

The data come from surveying the five largest banks and five largest thrifts in 25 of the nation's biggest markets from July 24 to Aug. 10, 2012. We asked those institutions about terms on one generic noninterest account and one interest-bearing account for the general consumer.

This data is fine for what it is, but let's note that it's covering perhaps 10-30 financial institutions (I can't tell if it is the 5 largest banks and thrifts overall or the 5 largest in each market, but even if the latter, it's likely to be significantly the same).  Durbin covers around 100, and there are almost 8,000 total in the US.  Within the 10-30 institutions surveyed, the data is about two generic types of accounts.  The problem is that banks offer a whole range of accounts. So we've got a small and possibly unrepresentative sample of banks reporting an unrepresentative sample of accounts. This isn't data on which one can bank, so to speak. But this is the data source for four of the first five charts in Zywicki et al.'s piece and two of the five main summary bullet points regarding the availability and minimum balance for fee-free accounts.   

How about the data Zywicki et al. rely upon for their third summary bullet point, a claim that Durbin resulting in more than a doubling of average monthly fees?  The data source on this is MoneyRate.com.  What is this data?  Again, Zywicki et al. don't explain, but like Bankrate, this isn't a scientific sampling:

The data in each semi-annual MoneyRates.com Bank Fees Survey is based on the MoneyRates Index, a sampling of 100 banks that includes 50 of the nation's largest banks and an equal number of medium-sized banks. [A description of the MoneyRates Index is here.]

Even if we were to assume that the MoneyRates.com sample was representative in terms of institutions, there's no indication about what data is really being collected.  Data on all accounts or on just a sampling of accounts?  If it's anything like the BankRate.com survey, which is my hunch, then it's not a representative sampling of accounts.  And it sort of has to be that way because of the lack of standardization of checking accounts.  Lots of accounts are "free" if.  If one maintains a minimum balance, has direct deposit, does less than a certain number of transactions, etc. Is that a no-fee account or a fee-account?  That's a judgment call, and that makes it hard to survey. 

Even more interesting, however, is how Zywicki et al. interpret the MoneyRate.com data.  In their own words, Durbin Amendment-covered banks have "[d]oubled average monthly fees on (non-free) current accounts between 2009 and 2013, from around $6 to more than $12."  That statement is a factually true description of what the MoneyRate.com data (for whatever it's worth) shows. But it is totally misleading. The jump from $6 to $12 occurred between 2009 and 2010, before Durbin was passed and before Durbin went into effect. Zywicki et al. surely know this, yet their article implies that the jump in monthly fees was due to Durbin, when the data they have shows exactly the opposite.  

I haven't fisked the rest of this piece, but given what I've already found (and past experience with one of these authors on data points), I'm skeptical of any claims made by the authors.  But perhaps we should keep in mind Todd Zywicki's recent dictum that "bad research beats no research." Q.E.D.