>>From the presser today:
>>
>>"People are blaming financial regulation for raising fees."
>>
>>That's right, I'm sure they're just absorbing the extra costs of compliance officers. Amateur hour in the White House. Anybody want to rethink their assessment of Obama's supreme brilliance? Anybody? Bueller?
>
>In fact, what's really happening is that financial regulation is forcing them to make the fees more public, so people know what they're paying. (That is, by lowering what the banks can charge vendors, the banks then have to tell people that they're being charged.) That's good.
>
>Tamar

In most cases, the debit card users previously were not directly charged. The merchant was charged a per-transaction fee by the bank. Those costs (avg $0.44) were passed to the consumer by the merchant through various means, minor price increases accross popular items, minimum transaction amounts to make the fee negligible or a direct additional charge. One direct charge I know of is ARCO/AMPM which charges a $0.45 fee for all debit transactions and did so prior to the new laws.

The Durbin amendment set a cap at $0.21 on what banks can charge merchants for the debit transactions. The only thing that changed is that extra $0.23 is now going to the merchants instead of the banks. This is why Walmart, Target, Home Depot, etc went all out lobbying for this amendment.

The banks, now have a $16 billion revenue hole. Contrary to populist opinion they're not going to just "take-it" for this or any of the other revenue deteriorating effects of CARD. They have a legal responsibility to their shareholders to make up that shortfall through various means. Thus, job cuts, branch closing and opening new revenue streams. We've already seen, lessened cash-back percentages (AmEx), higher fees (all of my banks have raised various fees), loss of free-checking and now debit card fees on the user. What interesting to me is that it's $5 if you use your debit card once or multiple times. Using the $0.23 difference that means that now if you use your debit card at least once/month, you'll need to use it 22/month to pay less than you were before the new regs. Obviously there will be a shift in consumer habits because of this, but I'll be curious to see how this new revenue stream works compared to the old. I have a hunch that the $5 was chosen for a profitable reason. ;)

Consumers are still waiting for the merchants to pass through that $16billion. Care to venture a guess when that'll happen? ARCO/AMPM is still charging $0.45 per debit transaction.

Here's a detailed account of the sausage making.
http://www.bloomberg.com/news/2011-06-28/how-wal-mart-swiped-jpmorgan-in-16-billion-debit-card-battle.html