This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Consumers Don't Know the Good News on Durbin Rule

NEW YORK (BankingMyWay) -- This week TheStreet detailed the impact the so-called "Durbin Rule" had on consumer prices. Enacted in September 2011, the rule limited the amount of debit card fees big banks could charge U.S. merchants.

While merchant groups say the rule has helped keep debit card fees down, consumer advocates say retailers have not passed those savings on to consumers. Now a major debit card payment processor weighs into the debate, saying consumers may be getting a better deal than they might think.

Bob Baldwin, vice chairman at top payment processor Heartland Payment Systems (HPY), said in comments to TheStreet that the Durbin Rule is a net positive for businesses and consumers.

"While some skeptics claim that savings resulting from the Durbin Amendment have yet to materialize for American consumers, we believe both business owners and consumers are feeling the benefits of lower debit card swipe fees," he says. "While it is not possible to prove how much of the savings have ended up in the pockets of consumers, we have seen repeated demonstrations that our merchant customers across the country are using the Durbin savings in a variety of ways that are impacting consumers -- even though they might not realize they are benefiting from the reform."

Baldwin says Heartland has surveyed merchants at the 250,000 locations the company does business and reports the following results from debit card reform:

  • Merchants are hiring additional staff (or avoiding letting any go).
  • They are opening new locations.
  • They are investing in critical items such as new technologies, equipment, fixtures and delivery cars.
  • They are diversifying product offerings, maintaining pricing and offsetting rising fuel and food costs.

"We believe that consumers are not only benefiting from these customer service enhancements, but in many cases, our merchants have been able to avoid raising prices due to these debit savings," Baldwin says.

More specifically, Baldwin points out how merchants are using the savings culled from the Durbin Rule to help consumers and their companies:

  • John Bertram, owner of Stuft Pizza Bar & Grill in La Quinta, Calif., has been able to keep menu pricing the same for consumers due to these savings -- despite rising food costs.
  • Jon Swede, owner of Po Boys in Tallahassee, Fla., recently invested in a new freezer and gave raises to his staff.
  • Steve Lapke, operations director of Sharp Oil in Covington, Ky., is pouring every dollar in savings back into his business in the form of new technology (hardware and software) and opening a new location.
  • Ken Moore, owner of a restaurant called Midtown Sundries in Denver, N.C., said the savings have actually helped him stay in business in this challenging economy. The monthly savings helped him offset food costs, which rose 7% from last summer to this one.

  • Tom Bruins, owner of The Original Pancake House in Maple Grove, Minn., has improved the dining experience for his customers by renovating the patio area.

Debit card reform has indirectly benefited consumers in other ways, Baldwin says.

"We have found that lower debit card processing costs have also encouraged merchants that weren't previously accepting cards to start offering the convenience to customers," Baldwin says. "Indeed, the recent proliferation of mobile acceptance devices owes its growth not only to the capabilities of smartphones, but also to the substantial reduction in regulated debit rates, which allow for more attractive pricing for the micro-merchants that are adopting these solutions."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,042.87 -55.58 -0.33%
S&P 500 2,000.20 -3.17 -0.16%
NASDAQ 4,588.4420 +8.1710 0.18%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs