Proponents of the Durbin Amendment to the Dodd-Frank Act claimed that capping debit card transaction fees would create a trickle-down effect for both small businesses and consumers. This month, one of the country's largest credit card processors released specific details about the new regulation's impact on its customers. In a statement to reporters, representatives from Heartland Payment Systems said that they had already passed along nearly $1.8 million in fee reductions to merchants between October 1 and 3, the first three days after the new rules took effect.

Banks shifting debit card revenues to service fees

According to Heartland president Bob Baldwin, some of Heartland's competitors have responded to the new rules by raising other service fees. Merchant processing companies typically charge merchants a monthly account fee and a payment gateway fee in addition to per-transaction fees. On a promotional website launched to distribute their survey results, Heartland officials explained that the average cost of processing a debit card transaction dropped from 44 cents to 24 cents. The company claims that some competitors have shifted the difference in costs to other service fees that fall outside the scope of the Durbin Amendment, nullifying the expected impact of the new rule.

Fast food restaurants prefer credit cards at the counter

Heartland's report reveals that quick-service restaurants may not enjoy the intended benefits of the new law, however. Under previous regulations, Visa and MasterCard permitted merchants with mostly small transactions to process debit and credit card purchases under a special "small ticket interchange fee." Payment processors championed the alternative cost structure to help make online micropayments and in-store small purchases profitable.

However, the flat debit card fee structure imposed by the Federal Reserve actually raised the effective rate for many small merchants from 2.08 percent to 2.15 percent. Larger QSR chains have already launched loyalty programs that reduce their credit card processing fees by requiring customers to load larger transaction amounts onto in-house gift cards. Other small merchants have responded by installing intelligent point-of-sale terminals that use "steering" techniques that encourage customers to use the least expensive form of payment for a given purchase.