Durbin Amendment and Small Business Merchant Accounts

 In October of 2011 a new law was put into place called the Durbin Amendment. The Durbin Amendment was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The purpose of this law was to greatly reduce the fees that merchants pay for debit card transactions. Which I think any retailer would be excited to get a break on merchant fees, am I right? Unfortunately, this not the case for everyone… 


This month I was contact by a local small business owner and he was wondering why their credit card fees had increased… I started pouring through their statements and looking at each transaction and sure enough the Durbin Amendment is actually costing this client more money and there is basically nothing I can do to stop it.


Why can’t I be the hero?
My goal for each and every client of mine is to be their hero (technically heroine, but oh well…). I want to give them good customer service, provide them with competitive merchant services pricing, and just be a fountain of knowledge for when they have questions. However, with this client I could not be the hero because the Durbin Amendment had my hands tied.


How did Durbin Affect Them?
The client runs a local coffee shop, so they have high transaction volume with low transaction amounts. Their average transaction ranges between $5.00 and $7.00. While reviewing their statements I noticed a huge difference between some fees in August and November. There was one particular area that just took my client to the cleaners and that area was specific debit card transactions. In August he processed 760 transactions with an average dollar amount of $6.45. The fees associated with this transaction type were 1.55% + $0.04 per transaction. So in total he averaged a processing rate of 2.17% for these debit card transactions. Once the Durbin Amendment came into effect his world changed… In November he processed 531 transactions with an average dollar amount of $5.57. The fees associated with this transaction type were 0.05% + $0.22. The change in processing caused him to process the bulk of his transactions at 3.9%, which is almost 2% higher than before!


How Can This Happen?
Some of you may be thinking that you would give anything to process a transaction 0.05% — the problem isn’t with the percentage fee, it is the transaction fee that comes with the percentage fee. Since my client processes a low dollar amount around $6.00 the + $0.22 starts his processing fee at 3.6%. For a coffee shop owner he makes his living on small dollar transactions, so the Durbin Amendment is actually eating at his bottom dollar. 


The Durbin Amendment affects each and every retailer in a different way. Over the next few months I will be looking into how the Durbin Amendment has affected some clients in particular. I will also be giving you more insight on the Durbin and what it actually means for you, the merchant. So stick around for an education on The Durbin Amendment!


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