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National Restaurant Association - Initial benefits of Durbin Amendment add up

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Initial benefits of Durbin Amendment add up

The savings from reduced debit card interchange fees continues to add up.

Many restaurateurs are seeing the effects of financial reform legislation, now that a government cap on debit card swipe fees has been in effect for about two months.

The cap, which took effect Oct. 1, is a limit on what large banks can charge merchants for accepting debit card transactions. The Federal Reserve announced the limit in June.

According to National Restaurant Association partner Heartland Payment Systems, its restaurant clients saved about $8.4 million between Oct. 1 and Nov. 20 (the latest date for which figures are available).

The rule applies to debit cards issued by regulated banks, or those with more than $10 billion in assets. Those large banks must limit interchange fees to 22 cents plus 0.05 percent. Previously, the average interchange fee on debit card transactions was about 44 cents.

Since October, the average savings per transaction between regulated and non-regulated banks is 18 cents, according to Heartland.

The savings are most apparent in states with a high concentration of regulated banks, says Heartland CEO Bob Carr. For example, restaurants in Connecticut are saving on average 30 cents per transaction, and those in New Jersey and Rhode Island are saving on average 28 cents per transaction.

Restaurants in less populated parts of the country, where credit unions and smaller banks outnumber regulated banks, won’t see as significant savings as their peers in large cities, Carr says. For example, in Arkansas, where the average savings is 13 percent per transaction, about 53 percent of the dollar volume comes from transactions made on cards from regulated banks. In comparison, transactions made on cards from regulated banks represent 85 percent of the dollar volume in Connecticut.

The savings also are greater on transactions made on rewards cards from regulated banks, he points out. Before the Federal Reserve capped the fees on cards from regulated banks, the fees were much higher for rewards cards, she says. However, if customers are paying for meals with rewards cards from non-regulated banks, restaurants are still paying the higher fees.

Heartland calls the savings on debit card interchange fees “Durbin dollars.” The term refers to a provision in the July 2010 financial reform legislation known as the Durbin Amendment, which the NRA fought to pass.

Most restaurants with average tickets of $11 will save money on interchange fees as a result of the cap. However, those with average tickets less than $11 likely will pay more in interchange fees, Heartland says.

As a leading member of the Merchants Payment Coalition, the NRA continues to work to preserve the interchange-fee cap as payment card companies and large banks try to chip away at the Durbin Amendment. NRA also is working to also make sure the Federal Reserve examines the practice of banks charging too much on small-ticket transactions under the new law.

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