As the last minute addition to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Durbin Amendment has been the cause of perhaps the greatest deal of controversy of any part of the legislation. The basics of the amendment mean less of a fee coming from big banks to merchants when customers use either debit or credit cards.
However, the incredibly powerful banking lobby has made these advantages for small businesses and customers incredibly difficult to keep. The American Bankers Association has managed to create an issue in the eyes of the public about government regulation of interchange fees and commerce. However, they were unsuccessful in getting the Durbin Amendment removed from the legislation before it passed.
Of course the banks will find ways to make consumers pay for the money that they are losing. The Durbin Amendment is a great deal of the reason that people are seeing much less free checking accounts at big banks and opportunities for rewards checking accounts.
However, retailers have not yet lowered their prices in the aggregate to pass along the savings that they are receiving from the Durbin Amendment. This raises the question that if regulation that is meant to help the consumer never actually reaches the consumer, what is the point of doing it? Because of the actions of the big banks and retailers, consumers are actually worse off.
In order to counteract the lost fees, both Visa and Mastercard jacked up their rates on merchants that do not have the leverage to fight them. This affects small businesses exponentially more than large businesses, which is another cause for contention, especially within the Republican Party.
In the end, all of these issues will come up again with future legislation and amendments that will force the lawmakers, banks and retailers to compromise. If the consumer does not speak up for himself, he will definitely be left out of these future negotiations as well. Although the Durbin Amendment represents at least a prima facie effort by legislators to help needy consumers in the wake of an extended recession, to get real change will require a bit more force.