Tag Archives: durbin

Durbin Debit Fees Revisited [2023 Update]

Two years after the Durbin Amendment became law, the consequences of this historic legislation are still unfolding. In the coming months, new developments in Durbin implementation could lead to historically low debit swipe fees for merchants. Last July, U.S District Judge Richard Leon ruled on a Durbin-related lawsuit that pitted a consortium of retailers against the Federal Reserve.

Could Debit Interchange Be in For Serious Reductions?

Siding with the plaintiffs, Judge Leon ruled that the Fed had failed to implement the Durbin Amendment in good faith. Since 2011, the Fed has enforced a debit fee cap of approximately 24 cents per transaction. Judge Leon has not specified what new cap the Fed should implement. However, the judge’s ruling did favorably mention “Alternative 1,” an interchange cap proposal that the Fed considered and dropped in 2010. In the past few weeks, much of the public reaction to the new ruling has focused on Alternative 1, which caps debit swipe fees at 7 to 12 cents.

Interestingly, the Fed’s new debit fee cap could end up far lower than 7 cents per transaction. A widely overlooked report from the Federal Reserve sheds light on how per-transaction costs for debit card issuers have dropped 34% since 2009.

Released in March, the Fed report was overshadowed by the body’s decision to maintain the status quo in debit fee limits. Judging from the data in the March report, the Fed’s new debit fee cap could solidify well below 7 cents. Some experts predict that the new cap will hover around 5 cents per transaction. Merchant services analyst Eric Grover suggests that even a 2 cent cap is not beyond the realm of possibility.

Since debit cards have achieved deep saturation throughout society, changes to interchange fee rules create dramatic effects in multiple industries. For many companies, a 12-cent debit fee cap would provide much-needed breathing room during this time of slow economic growth.

On the other hand, government-mandated changes in merchant services can have unintended consequences. Defying all expectations, the original implementation of the Durbin Amendment led to higher costs for many small businesses. A similar dynamic could complicate court-ordered debit fee reform. Debit cards are so critical for modern commerce that society must find the right balance when regulating debit card issuers. Future developments will demonstrate if Judge Leon’s ruling will promote a healthier, more sustainable economy.

What Does The Future Hold For Interchange?

Now that card payments are a major force in the economy, a system had to be set up to move this “virtual” currency from customer to business. This system is the basis of interchange.

The evolution of how customers pay businesses has changed dramatically over the past half-century or so. Cash was king during the infancy of American Express, MasterCard, and Visa. But as their networks expanded and more and more consumers began to expect to be able to pay with plastic in stores, merchants felt the pressure of lost sales if they turned away customers with credit cards.

What Exactly Are Interchange Fees?

Interchange fees are payments for handling the transaction between a business bank account and the cardholder’s bank account. They cover the costs of converting the electronic transaction through a credit or debit card into funds in the merchant’s account. These fees also cover administrative services and fraud risk.

The card networks (Visa, MasterCard, Discover, and American Express) have developed intricate pricing models based off of criteria like brand, geography, card type, business type, and even transaction type. With all these variables it is easy to understand why there are hundreds of different interchange rates.

Why Do We Need Interchange?

The original intent behind charging merchants interchange was to offset the risk that issuing banks took for any losses occurring from debt default by the cardholder. According to Visa “the primary role of interchange is to create the right balance of incentives between a cardholders’ financial institutions – which promote and issue Visa cards to consumers – and a merchants’ financial institutions – which enroll and process Visa transactions for merchants.” Or basically that it is a balance between what the businesses are willing to pay for the ability to accept cards and what the banks are willing to accept as far as risk of profit and loss.

Interchange In The Past

In the early 1970s interchange was just one rate. As more merchants in different industries began to accept credit cards and new card types and rewards were introduced new rates began to appear in the interchange charts. The goal of the card networks when determining what rates to establish has always been a balancing act between covering any losses banks may realize and keeping the cost to merchants low enough so that it is attractive from a financial standpoint to the business.

So What Is Next For Interchange?

As interchange fees are set by individual card companies there is an ever-present need to adjust rates. These pressures include other card brands and new and emerging technology. Since banks have the freedom to choose what card type they issue to their customers, they will usually favor the choice that gives them the most profit, which keeps rates overall pretty competitive.

Legislation and legal costs can also factor into where rates are headed. Late in 2012, a judge ruled against Visa and MasterCard in a class action lawsuit brought against the card companies by retailers and other business associations. The retail merchants accused Visa and MasterCard of increasing swipe rates while there was no legislation to protect the businesses from high fees.

Previous to this litigation, the Federal government passed the Durbin Amendment that set a ceiling on what card brands could charge for certain debit transactions. This bill was designed to greatly lower the cost to merchants, and therefore consumers, when paying with a debit card. Lawmakers argued that the risk to banks was very low with this type of card and thus did not justify the high rate that businesses were paying.

While it seems that only banks and card companies love interchange rates, it is hard to envision the complex systems we have without some sort of cost associated. The truth of the matter is that if your business is going to accept credit cards, you are going to pay interchange rates no matter what merchant services company you decide to go with. The advantage that Host Merchant Services offers over others is the transparent, easy-to-understand pricing model that is interchange plus. Quite simply you just pay a small markup over published interchange rates for any given card. No tricks like tiered pricing or overpaying with a flat rate for every card.

If you aren’t currently accepting credit cards at your business contact one of our payment experts today at 877-517-4678 or simply fill out our quick sign-up form. They will guide you through the process of setting up a merchant account and explain the benefits of taking this form of payment. And if you are already taking card payments let us provide a free, no strings attached statement analysis to see if you truly are getting as good of a deal as you think.

Merchants Appeal Key Part Of Interchange Settlement

Today the Official Merchant Services Blog brings you the most recent developments in the ongoing credit card interchange settlement lawsuit.

Merchants opposing the pending credit card interchange case filed an appeal last week challenging the court’s preliminary approval of a key part of the settlement. The appeal, filed by four merchants and seven merchant trade groups, asks the Second U.S. Circuit Court of Appeals to nullify the lower court’s preliminary approval. The merchants are collectively challenging a provision of the settlement that releases defendants Visa Inc., MasterCard Inc., and a handful of major banks from liability for interchange pricing policies. Meaning that merchants could no longer sue Visa or MasterCard for interchange policies they deem unfair.

“This settlement has fatal legal defects and should not get preliminary approval. We look forward to presenting the problems we see in this proposal to the Second Circuit Court of Appeals,” said Jeffrey Shinder, the merchant group’s attorney and managing partner at Constantine Cannon LLC, New York, N.Y.

About 1,200 merchants and trade groups have raised objections to the agreement since it was reached in July. In the deal, the card networks and banks agreed to temporary credit card interchange relief valued at $1.2 billion and $6 billion in damage payments for merchants along with relaxation of certain network rules, including ones that restricted surcharging. The pact received preliminary approval from the Brooklyn, N.Y.-based district court’s Judge John Gleeson on Nov. 9.

Besides the liability release, merchants have objected that the settlement does nothing to reform the networks’ interchange processes and cements in place a number of anti-competitive practices. “The merchant community is deeply committed to reforms that bring transparency and competition to the broken electronic payments market. The volume and diversity of those objecting to this flawed proposal is remarkable and continues to grow,” Shinder said in his statement.

The 11 merchants and merchant groups filing the appeal are: Coborn’s Inc., D’Agostino Supermarkets Inc., Jetro Holdings Inc., Jetro Cash & Carry Enterprises LLC, Affiliated Foods Midwest Cooperative Inc., National Association of Convenience Stores, National Association of Truck Stop Operators, National Community Pharmacists Association, National Cooperative Grocers Association, National Grocers Association, and the National Restaurant Association.

Opponents said the plan would protect what they view as anti-competitive interchange practices from further challenges by merchants, even from merchants that don’t yet exist. Opponents also questioned the value of the new surcharging freedoms, noting that 10 states prohibit the practice. This settlement attempts to force a one-size-fits-all solution onto a wildly diverse group of merchants, which may be extremely unsuccessful.

We have discussed this settlement from different aspects previously, noting the advantages it would seem to give the Issuing Banks over merchants. Although it is not finalized yet, the dissenter’s cries seem to be going relatively unheard, as they believe that the settlement protects the status quo more than anything, and will not change the way the networks set interchange. Host Merchant Services will keep you informed of all the latest news involving this legal battle between the merchants and the card-issuing giants.

Barnes & Noble Data Breach [2023 Update]

Today’s edition of the Official Merchant Services Blog will take a look into the newest data breach, involving NY-based Barnes & Noble Inc.

Barnes & Noble revealed last week a “sophisticated criminal effort” had taken place at 63 stores, resulting in hacked PIN pad devices putting some of its customers at risk. The company discovered the hacking in September, but did not disclose it until recently on the advice of federal authorities. Security experts at the FBI have admitted that immediate disclosure in data breaches can make it harder for investigators to find the perpetrators.

In response, the chain has ceased using all PIN pads in its stores, and it has identified the affected locations in California, Connecticut, Florida, New Jersey, New York, Illinois, Massachusetts, Pennsylvania and Rhode Island.

“The tampering, which affected fewer than 1% of PIN pads in Barnes & Noble stores,” the company said in a news release, “was a sophisticated criminal effort to steal credit card information, debit card information, and debit card PIN numbers from customers who swiped their cards through PIN pads when they made purchases. This situation involved only purchases in which a customer swiped a credit or debit card in a store using one of the compromised PIN pads.”

Barnes & Noble said its customer database was unaffected, and that none of the compromised PIN pads were at its college bookstores. The company also said the breach did not affect e-commerce sales, customers who bought online or through company’s Nook e-reader and Nook mobile app remain safe.

The bookseller is also working with the payment card networks, banks, and card issuers to identify accounts that may have been compromised. The company expects to have to go through a re-validation process before it again is deemed to be Payment Card Industry (PCI) compliant.

Although unfortunate, this data breach could have been prevented by discontinuing the use of unnecessary equipment. PIN pads for terminal are no longer a cost benefit to a company, since the Durbin Amendment. Durbin makes PIN Debit rates the same as Swipe Debit rates (as long as the bank is large enough to qualify), essentially eliminating the need to a PIN pad altogether. Check out our blog post on the differences between PIN and Swipe Debit here. Fewer PIN pads would reduce tampering of terminals and theft of cardholders PIN numbers.

In the meantime, Host Merchant Services continues to offer the lowest PCI Compliance rates in the industry, as well as a vigorous PCI Compliance Initiative that seeks to inform and educate everyone interested as to the details of the process, step-by-step.

HMS Small Ticket Program

Today’s edition of the Official Merchant Services Blog will discuss the best way for merchants to save money on fees when accepting credit or debit cards for smaller transactions. Host Merchant Services is committed to bringing its clients the lowest fees in the industry. Our Small Ticket Program is a feature that helps us do just that for those merchants who process transactions at $15 or less.

Many merchants have seen debit savings thanks to the Durbin Amendment, which caps the Interchange Fees that Visa and MasterCard charge for debit cards at $0.24 and 5 basis points. Smaller merchants do not see the savings when running transactions under $15, since the 24-cent per item fee and the 5 basis points amount to 2.1% of the total ticket, before any additional fees are incorporated.

The Small Ticket Program however, allows qualifying merchants to pay a per item fee of only 5 cents, while paying an interchange rate of 1.6% for Visa. MasterCard has set its small ticket rate at 4 cents and 1.55%. This program saves merchants money on lower transaction amounts, since the per item fee is less of a burden on them in terms of overall effective rate.

The Interchange category for small tickets is available for merchants who are on Interchange Plus pricing, and who qualify under the Visa business types listed below. Merchants enrolled in flat rate pricing or any type of three-tiered pricing will not be able to utilize these savings, which is just another way Interchange Plus pricing is truly the best out there.

While some processing companies hide added percentage points in the difference that exists between small ticket and large ticket processing, Host Merchant Services gives the savings directly to you. Our Small Ticket Program offers a better Interchange category and a lower per item fee, saving you more money in processing fees for all purchases $15 or less.

Visa opened up the types of businesses that qualify for Small Ticket Processing in November, 2010. Now each of these industries qualify:

Local Commuter Transport
Limos & Taxis
Bus Lines
Bridge & Road Fees/Tolls
Grocery Stores/Supermarkets
Convenience Stores
Service Stations
Fast Food Restaurant
Drug Stores
Book Stores
News Dealers, Newsstands
Dry Cleaners
Quick Copy, Reproduction & Blueprint
Parking Lots & Garages
Car Washes
Motion Picture Theater
Video Tape Rental Stores
Post Stamps/Government Only

If you qualify under any one of these categories, contact Host Merchant Services for your small ticket savings right away. Host Merchant Services promises: we deliver personal service and clarity and as always, we want to keep merchants informed of any potential savings.

Durbin Double Down [2023 Update]

In this installment of the Official Merchant Services Blog, we look at the actions several retail trade groups and merchant advocates have taken to further the fight against the antitrust settlement proposed by Visa and MasterCard. We have touched upon this subject several times before, however these steps may have been the most drastic yet.

In an open letter last week to leading members of congress, the National Retail Federation (NRF), the Retail Industry Leaders Association (RILA), and seven other large retail-related groups expressed their frustration with the pending litigation in the U.S. District Court for the Eastern District of New York, saying that the outcome could further “entrench the Visa/MasterCard duopoly.”

The groups called on congress to pay attention to the state court settlement, in an attempt to escalate the issue and garner attention from lawmakers and Americans.

The groups argue, “The proposed settlement, which was negotiated by Visa, MasterCard and lawyers purporting to represent the merchant community, is one-sided and preserves the very anti competitive actions that were the genesis of the lawsuits.”

“Given the important oversight role of Congress and your continued interest in this important issue, we write today to urge you to reject the false claims from the card networks and their representatives.” The letter also stated “The proposed settlement does nothing to resolve the failures in the electronic payment market and continued Congressional involvement in these issues is imperative. We look forward to keeping you fully informed as the legal process moves forward and the chorus of objections grows.”

RILA’s Brian Dodge described the problem retailers face, “Visa and MasterCard centrally set fees that are ultimately paid by merchants and collected by issuing banks. With two fee schedules imposed by two companies that control 70 percent of the marker there is no meaningful competition.”

The groups argue that the $7.2 billion dollar settlement is not the problem, even going so far as to accuse Visa and MasterCard of using the pending settlement exchanges as penitence for maintaining the status quo.

In a statement released in July, just after the settlement was announced Visa said it believes that the settlement is in the best interests of all parties involved. “This agreement should remove the distraction of litigation for all parties,” said Joshua R. Floum, general counsel of Visa Inc. “We will go forward with a focus on helping retailers grow their businesses and providing them with efficient and valuable payment options.”

On October 3^rd, these retail and trade groups will appear before a court seeking to order the Federal Reserve Board to start over in devising regulations for implementing the controversial amendment’s provisions because the Fed allegedly did not follow the amendment’s dictates in setting the debit card rules now in place. The trade groups and retailers sued the Fed last November in an effort to start the rule-setting process anew. In a May filing, the plaintiffs said the board “manufactured ambiguity” in its interpretation of the amendment’s language. A Federal Reserve spokesperson would not comment about the upcoming hearing, although attorneys for the Fed said the board properly implemented the law’s directives regarding the authorization and settlement costs that could be considered in regulating debit card interchange, as well as which costs to exclude.

Retail groups continue to fight both the Interchange settlement and the Federal Reserve Boards Durbin rules. There seems to be no end in sight for this case, and only time will tell if the Fed will be forced to reset its Durbin amendment rules and regulations and start anew.

NRF Opposes Interchange Settlement

It’s been a little while since the Official Merchant Services Blog touched on the increasingly sensitive topic of the Credit Card Interchange Settlement. We first talked about the possibility of ‘The Big Cash Comeback’ when the settlement was first announced, and later we discussed the opposition to the settlement.

Seven years after the first lawsuits were actually filed against the bank card networks and some leading banks, a tentative settlement was reached on July 13 of this year. The agreement has had many mixed reviews, and some big name retailers have come out against it, including most recently the National Retailers Foundation, the nations largest retail trade association. The NRF’s members operate 3.6 million stores nationwide, however the organization itself is not involved in the lawsuit, which includes individual and class merchants as well as trade-group plaintiffs.

Under the proposal, the main defendants, Visa and MasterCard will pay $6.6 billion in damages and temporarily reduce interchange rates to save merchants another $1.2 billion. Merchants also will get greater freedom to surcharge card transactions and could form bargaining groups to negotiate interchange with the networks. In return, the networks will be freed from future legal challenges from merchants regarding interchange rates and merchant rules, even from merchants that didn’t participate in the current lawsuit.

I think the key points here are the temporary reduction of interchange rates as well as the fact that all merchants give up their rights to sue Visa and MasterCard upon accepting the settlement. Merchants will most certainly be satisfied by the reduction of interchange rates, but the drop will only be temporary. After a few months Visa and MasterCard will raise them again, and continue to collect outlandish fees for credit card transactions. Also, not every merchant is involved in this suit. I don’t think it’s a good deal for merchants to give up any of their rights, particularly the rights to any future litigation.

The National Association of Truck Stop Operators (NATSO) released a statement on Monday, announcing their dismissal of the settlement, “We joined this lawsuit in search of real reform to a broken system, one that is shielded from normal competitive forces. This proposed settlement does not achieve this goal. It lacks meaningful fixes to a system that allowed Visa and MasterCard to set artificially high swipe fees and provided retailers and consumers with no choice except to pay.”

This statement echo’s the cries of dissenters, who say the settlement protects the status quo more than anything, and will not change the way the networks set interchange.

In conclusion, the settlement still faces harsh criticism, and Visa and MasterCard have not had much to say to those who oppose it. Only time will tell if the plaintiffs decide to accept the deal, or push back for a settlement more in their favor. Host Merchant Services will keep you informed of all the latest news involving this legal battle between the merchants and the card-issuing giants.

Visa’s Ups and Downs

The Official Merchant Services Blog takes a look at Visa’s wild ride between May 2 and May 3. In the midst of a very active first quarter of 2012, Visa’s earnings report came in. The San Francisco based credit card giant then took a ride on a roller coaster in the span of two days after the report was released.

The Up Vote

The company had good news to report on May 2: Visa said Wednesday that its profit for the first three months of the year was up 30 percent from the year before, primarily because credit card use rose in the United States and overseas. Bloomberg broke down some key statistics from the report in their story here: “The company said Americans rang up 12 percent more on their charge cards for the quarter. Debit card use grew by only 4 percent to $284 million, however, the slowest growth in a year.”

So the boost in Visa profits is tied to an increase in the use of credit cards in the first three months of the year. But it appears the Durbin Amendment, financial reform legislation designed to address problems with swipe debit fees, has slowed down debit card use. As the Bloomberg article reports, the Durbin Amendment appears to be having an impact on profits: “Banks have eliminated some debit card rewards programs since October, when the government limited the fees banks can charge stores for card transactions.”

The profit breakdown for the quarter paints a very rosy picture. Visa’s net income was $1.3 billion, or $1.60 per share. Wall Street was expecting $1.51. Revenue rose 15 percent to $2.6 billion. Wall Street was expecting $2.48 billion.

The Down Turn

And then the roller coaster ride took a dip. Bloomberg reported the next day, May 3, that Visa stock took a decline based on the details of a U.S. Antitrust Probe into Visa’s Debit Strategy. The article states: “Visa Inc., the payments network that has lost market share amid new debit-card rules, slid as much as 4.5 percent in extended trading after disclosing a U.S. antitrust probe into the firm’s pricing and strategy.”

Visa adjusted the network’s fee structure to defend its leading market share after the Durbin Amendment took effect in October. On March 13, the U.S. Justice Department’s antitrust division issued a civil investigative demand asking for information about Visa’s debit strategy. Bloomberg quotes Visa Chief Executive Officer Joseph W. Saunders as saying in a conference call: “We are confident our actions are appropriate and that our response to the DOJ supports that.”

According to Saunders Visa has received four other requests for information from the Justice Department since 2007, and all have been resolved with Visa’s full cooperation.

The Durbin Factor

The Visa news comes after recent announcement from MasterCard, which stated that their own first-quarter profit increased 21 percent to $682 million. Like Visa, MasterCard’s profits also beat Wall Street estimates.

Speculation suggests that the hard cap on Debit Card Swipe fees imposed by the Durbin Amendment from October 2011 may have helped MasterCard take some market share away from Visa. MasterCard has been winning deals to handle processing of debit transactions according to the company’s Chief Financial Officer Martina Hund-Mejean.

Bloomberg quotes Hund Mejean as saying in a conference call to analysts: “In every quarter we’re going after business very surgically and opportunistically. You can see those results in our numbers.”

And according to Tien-tsin Huang, a JP Morgan Chase & Co. analyst in a May 1 research note, Bank of America Corp. — the biggest debit-card issuer and catalyst of post-Durbin media frenzy — switched to MasterCard.

Visa’s Fees Bite Back

Visa changed its debit-card fees in April, creating new fees like the Fixed Acquirer Network Fee (FANF) in an attempt to create incentives for merchants to route more transactions on the company’s network. The fees, which had been variable were broken into various components. To read more about those fees, you can CLICK HERE to see Host Merchant Services‘ own coverage of the April fees. The Bloomberg article suggests that Bank of America switched to MasterCard in reaction to the new Visa fees and MasterCard’s own surgical strike against Visa’s market share.

Visa, MasterCard Add New Fees

The Official Merchant Services Blog has just learned that Visa and MasterCard are planning to add new processing fees in the coming months — fees specifically targeted toward Debit Card Swipe transactions. These new fees, which we are consolidating and dubbing as “Card Association Fees” are going to complicate the pricing process for Merchant Services Providers in 2012.

Tricky Fees

Visa, MasterCard and Discover are the main players in the “card associations” and they are the driving force behind interchange and interchange rates. These associations periodically review and modify their interchange rate structures and billing strategies. What this means is that normally each year the big credit card companies get together and increase interchange rates. But after the Durbin Amendment went into effect in 2011, the credit card associations are taking pause and tweaking their own strategy. So effective April 2012 there are new Card Association Fees being implemented and these fees are not interchange fees. These are brand new processing fees created by the associations.

Visa’s New Fees

Visa has announced that beginning April 1, 2012, it will be introducing a trio of new fees:

A Transaction Integrity Fee
Revisions to its Network Acquirer Processing Fee
A Fixed Acquirer Network Fee (FANF)

Transaction Integrity Fee: Visa’s Transaction Integrity Fee is a new $0.10 fee that will apply to U.S. domestic regulated and non-regulated purchase transactions made with a Visa Debit card or Visa Prepaid card that fail or do not request Custom Payment Service (CPS) qualification. The CPS rates are Visa’s best rates and apply to both regulated and non-regulated transactions. This new fee can be viewed as a definite response from Visa to the Durbin Amendment’s interchange rate cap and finance reform/regulatory changes. This is part of the ninja-style set of moves The Official Merchant Services Blog has cited would be the reaction to the Durbin Amendment.

Network Acquirer Processing Fee: The Network Acquirer Processing Fee on Visa-branded signature debit will be reduced — going from $0.0195 per authorization to $0.0155 per authorization. The fee for credit card authorization will remain $0.0195 per authorization.

Fixed Acquirer Network Fee: FANF will apply to the acceptance of all Visa-branded products and is based on both the size and the number of merchant locations. The FANF fee will be based on volume reported in July 2012. Visa will require U.S. acquirers to provide new merchant location reporting for the tracking of this fee. The new reporting requirements will include a monthly breakdown of acquired merchants, number of merchant locations, and merchant sales volume by merchant Taxpayer ID. For Card Present merchants, with the exception of Fast Food Restaurants, a merchant Taxpayer ID with physical locations will be assessed FANF on a per-location rate basis. For example, Card Present Merchants with one to three locations will see a pass through per location per month fee of $2. Price per location per month will increase according to the number of locations – upwards of $65 month for merchants exceeding 4000 locations. Card Present High Volume MCC Merchants with one to three locations will see a pass through per location per month fee of $2.90. Price per location per month will increase according to location — upwards of $85 month for merchants exceeding 4000 locations. Customer Not Present, merchant aggregators and merchants primarily operating as Fast Food Restaurants (MCC 5814) will be assessed based on gross merchant sales volume originating from any Visa-branded card. Merchants that fall into this category with monthly gross sales volume ranging from less than $50 a month on the low end will see a $2 a month fee- to merchants with gross sales exceeding $400 million at a $40,000 a month fee. There are some 18 tiers, with a merchant falling into a volume tier of $8,000 to $39,999 a month seeing a new $15 per month FANF fee.

Visa will also effectively waive the FANF for eligible Charitable and Social Service Organizations (MCC 8398). The FANF waiver for Charitable and Social Service Organizations will be provided through a quarterly rebate process that Visa has indicated will be defined at a later date.

Continue Reading – Visa, MasterCard Add New Fees, Part 2

Payment Processing News Roundup [2023 Update]

Today The Official Merchant Services Blog is going to give you a roundup of the latest news that is affecting merchants and payment processing. Our goal is to keep you informed and up to date on all the important news developments in the industry. Armed with that information you can make the decisions and the moves to keep your business ahead of the curve. The news roundup today focuses mainly on The Durbin Amendment and its continued impact on consumers, merchants and processors. The Durbin Amendment will continue to have a major impact on processing throughout 2012, and we’ll continue to keep you abreast of the topic.

Durbin Reactions

The first story we bring you is from the Los Angeles Times and it’s about the fallout from the Durbin Amendment. The article, found here, states that by the end of last year 610,000 U.S. bank customers switched to a switched to a smaller institution to protest plans by major banks to impose monthly charges for using debit cards. The article says the data was reported by Javelin Strategy & Research in a report and that the 610,000 figure represented 11% of the overall 5.6 million people who switched banks in that time period. The article also noted that: “In addition to the 11% who joined the Bank Transfer Day movement in October, November and December, an additional 26% told Javelin that they switched not as part of the protest movement per se but because the banks charged too many fees.”

Host Merchant Services Predictions Confirmed

The next news item we’re reporting is from The Denver Post. In this article the Post reports pretty much exactly what Host Merchant Services predicted would happen in its Durbin Amendment Analysis article.

The Denver Post writes: “Instead of one new fee, prepare to be sold more products, offered new services, lose rewards and face more fees in general.”

In the HMS Article from 2011, we wrote: “Merchants will end up having to shoulder the burden of the extreme cuts in revenue that this cap brings. Those who predict that merchants will end up worse off by the amendment suggest that the banks, not wanting to take a $9 to $10 billion dollar loss in revenues for the year, will simply add fees to other payment options or get rid of premiums and extras that they had been offering merchants prior to the cap being put in place.”

So essentially the Denver Post reports that the banking industry is reacting as expected to the Durbin Amendment. We even did an entire blog making the statement that the banking industry was going to go in stealth mode like a ninja.

The Denver Post article also gives a recounting of the tale of the Durbin Amendment as it took center stage in the media spotlight. This entire tale was chronicled as it happened by The Official Merchant Services Blog both in its Countdown to Durbin Series, as well as its ongoing Durbin Coverage after the October 1, 2011 date that saw the bill’s provisions begin. The Denver Post recap is succinct and states: “Several other banks already had either imposed debit card fees or were testing them, and analysts had predicted the trend would spread to the entire industry. But BofA’s plan, which leaked out at the end of September, produced an enormous surge of criticism. Protesters from the Occupy movement, consumer advocates and even President Obama questioned the move, and an online movement called Bank Transfer Day emerged to encourage people to switch to small banks and credit unions. Bank of America ultimately called off its plans without imposing the $5 charge, and the rest of the industry followed suit in allowing fee-free use of debit cards.“

Durbin Going Bye Bye?

The final piece of Durbin-related news comes to us from payment processing review site cardpaymentoptions.com. In this article, they give an extensive roundup of their predictions for 2012 — and one piece is sub-titled “Durbin May Get the Boot.” The article states the Durbin Amendment was originally designed to help merchants deal with high swipe debit card transaction fees, but now that it’s been in effect merchants are feeling the legislation has harmed them. The article specifically cites merchants getting hit with much higher for small ticket transactions — a noted loophole in the law that many media sources criticized while the amendment was still being discussed by Congress.

The article then makes this bold prediction: “Several retail organizations have brought suit against the Federal Reserve in order to repeal/modify the amendment and even the main author, Dick Durbin, has admitted the new law is flawed. With such disastrous results, merchants should expect to see the Durbin Amendment either repealed or greatly modified this year.”

The Official Merchant Services Blog has reported on a few of these suits as they’ve come up. And the backlash against Durbin has been significant. But with the election about to be in full swing it seems, to us at least, that the Durbin Amendment may continue to kick around for 2012. In fact, we’ve also reported that there is growing interest in a similar cap on credit card processing fees, swinging things even further in a direction that will burden consumers and incur ire with the banking industry. It just seems like it will be a lot more difficult to get rid of Durbin after it’s started and that the path of least resistance for Congress on this issue will be to continue to add to the law with more tweaks and changes, making it even murkier and over-legislated. That’s more the federal government’s style.

What do you think? Will 2012 see the end of the Durbin Amendment and the great experiment that was finance reform for payment processing fees? Or will the federal government just try to keep working with the law they have in place trying to smooth it out?