NEW YORK ( TheStreet) -- A bipartisan bill that would have delayed a Federal Reserve rule capping debit card swipe fees failed to pass the Senate Wednesday, dealing banks another big blow on the regulatory front.

The rule, which is due to be proposed by the Fed in the next few days ahead of a July 21 implementation deadline, was ordered by Congress as part of the Durbin Amendment, one of the most controversial parts of the Dodd Frank financial reform bill that passed Congress last year.

The bill's failure is not a great surprise, judging from the attitudes of lobbyists interviewed by TheStreetearlier this week.

Big banks like Bank of America ( BAC), Wells Fargo ( WFC), JPMorgan Chase ( JPM) and Citigroup ( C) have opposed the Durbin amendment, which is estimated to cost them nearly $10 billion annually in lost fee revenues. Their shares all traded lower after the vote.

Credit card companies Visa ( V)and Mastercard ( MA)have also opposed the bill, and their stocks traded off even more sharply in the wake of the vote. Many analysts, however, believe investors overestimate the negative impact of the Durbin amendment on the credit card companies.

In addition to capping the swipe fees, the Durbin rules give retailers more freedom to choose which network to use to route debit card payments. In other words, if I use a Visa card issued by Wells Fargo at Target ( TGT), Target currently may have no choice but to route that payment through a Visa-owned network, creating revenues for Visa. While the details have still to be worked out, the Durbin amendment will give retailers more flexibility in deciding where to route the payment on at least some transactions.

The bipartisan Senate bill that failed Wednesday, sponsored by Jon Tester (D., Mont.) and Bob Corker (R., Tenn.) would have delayed Durbin's implementation while studying its potential impact. The bill was originally set to delay the rule by 24 months for further study, though that period was shortened to 12 months in an effort to attract more votes.

Smaller banks that depend heavily on debit card revenues have also opposed the rule, in particular TCF Financial ( TCB) which has attempted to challenge the Durbin rule in court.

Indeed, opposition to the bill by small banks, an unintended consequence of the Durbin Amendment, has earned sympathy with many members of Congress, including Barney Frank (D., Mass.), the top Democrat on the House Financial Service Committee.

On Tuesday, the Tester-Corker bill was amended so that the delay would be shortened to 12 months from 24 months, a measure the Democratic lobbyist characterized as an effort to attract more support for the bill.

-- Written by Dan Freed in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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