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Bankers may think they aren't doing anything wrong; they're just trying to provide a return for shareholders. So from their perspective, they're doing the right things. In that case, why are customers reacting so strongly? Because bankers are also doing things like overtly passing on costs in the form of fees, which infuriates the customers who are expected to pay them. And bankers are also making cuts in customer service, which not only angers customers, but it basically encourages them to walk out the door.

It doesn't have to be this way. As Gallup Chief Economist Dennis Jacobe, Ph.D., discusses in the following conversation, there are ways to do the right thing, both by the bank's P&L sheet and by its customers. But banks need a more educated view of customers and their own place in the consumer economy. In short, Jacobe says, they need to "think behavioral economics."

GMJ: What do you mean when you say banks should think behavioral economics?

Dennis Jacobe, Ph.D.: Behavioral economics is the study of the ways that emotion affects how people make decisions and, ultimately, how they behave. I think the debit card fee debacle provides a good example of how emotions play a role in consumer decisions.

The Dodd-Frank Act required changes in how much banks charged for processing debit card use. When the Fed issued the standards required by the act, bank management tended to feel that the imposition of limits on the fees they could charge retailers for debit transactions were totally unfair. As a result, many banks seemed to think it was OK for them to replace this source of income by adding debit fees to their customers' accounts. If they were questioned by their customers, they could explain that this was the result of a change in government policy. Thus, the debit fee pricing decision was a financial calculation aimed at replacing what had previously been a revenue source.

Unfortunately, this finance-focused approach to replacing the bank's lost revenue ignored some of the basic tenets of behavioral economics. From a behavioral economics perspective, one of the worst things a company can do is to begin charging a new fee for a service that had previously been free.

GMJ: And we all remember what happened.

Dr. Jacobe: Yes. Predictably, there was a huge backlash. And the situation was worsened by the way the proposed consumer debit fees became entangled with the anti-bank story line. Not only were these fees perceived as unfair, but they were also perceived as a way for greedy bankers -- who had been bailed out by U.S. taxpayers -- to gouge their customers. Further, the price-leader way of introducing these fees doomed them to failure.

GMJ: Price leader?

Dr. Jacobe: This is a tactic we often see in the airline industry: One airline announces a fee increase hoping the others will follow and match it. In this case, when some banks announced a debit fee increase, others did not follow the leader. As a result, it's not surprising that the banks that were trying to increase debit fees felt forced to rescind them before they went into effect.

This is all too reminiscent of banker efforts to charge for teller transactions many years ago. A terrible customer backlash led management to forgo teller use charges. However, it led to different forms of product packaging, which is a behavioral economics approach: Some banks offered a variety of discounts for not using the bank teller. In that instance, a behavioral economics approach changed a lose-lose scenario to a win-win.

GMJ: But most banks have shareholders. Don't those shareholders expect banks to make up the lost revenue?

Dr. Jacobe: Of course, and banks have approached this in various ways. Many banks have instituted new fee structures and/or cut services. Generally, they have suffered significant customer defections and a loss of loyalty and engagement among those customers who remain. These changes in the bank operating model -- and in combination with the overall decline in Americans' confidence in the nation's banks -- may explain at least in part why bank loyalty fell sharply as 2011 came to a close.

Given the current regulatory outlook -- and the recess appointment of Richard Cordray as the first head of the new Consumer Financial Protection Bureau -- it seems likely that the bank operating model will continue to change and evolve in the months and years ahead. Instead of making product and service adjustments in the traditional finance-driven way, bank management would be well-advised to make these changes in a customer-centric way -- and in a way that reflects behavioral economics.

GMJ: You mentioned customer engagement. How can banks promote customer engagement when consumers may be wary of the banking industry overall right now?

Dr. Jacobe: That's another area that needs some behavioral economics application. Given the changing banking model, some banks have reacted by cutting back on employees. That may make financial sense in the short term. The fewer people on the payroll, the lower the operating costs, and cost cutting is required when revenues are declining.

But that short-term gain -- and precisely how it is achieved -- needs to be viewed in a behavioral economics context, because customer-facing employees remain consumers' most preferred provider of banking services and may be a bank's best hope for promoting customer engagement. Gallup's 2011 proprietary retail banking study showed that the most powerful drivers of customer loyalty and engagement remain branch visits and call center interactions with a real person. So the last place to cut should be front-line employees, because when fewer people are providing what matters most to customers, loyalty and engagement can easily take a significant hit.

GMJ: Give me an example.

Dr. Jacobe: Cut back on people too much, and customers get longer times in the branches and on the phone. If you have fewer people to serve your customers, if you don't spend the money training tellers and bankers, then you don't have enough people providing top-quality customer service. Worse yet, a dehumanized approach to customer service can play right into the story line of greedy bankers who don't care about their customers.

GMJ: So banks can't assume that their websites can make up the difference in customer service.

Dr. Jacobe: Gallup's research shows that Internet and automated channels aren't the same. Customers use them, and they have a significant place in building relationships, but they can't replace human interaction. This may be disappointing to companies that have invested a lot of time and money in new technology assuming it would take care of most customer needs and cut employee costs.

According to the study, though online and automated banking channels are important to relationship building, they have become table stakes in building customer relationships. Banking consumers continue to use new channels while showing little tendency to substitute for -- or abandon -- live interactions through traditional branch and phone channels. Of course, this doesn't mean things won't change over time, but this is the situation bank management faces today.

GMJ: Which means that employees are still important in building customer engagement.

Dr. Jacobe: Employee engagement is more important today than at any time since the Great Depression because of lack of confidence in the banking industry and the declining confidence in individual banking companies. Most Americans don't seem to fully recognize the vital role our banking system plays in the success of the U.S. economy. Fully engaged bank employees can be important advocates for banking and their institutions by explaining to consumers and small-business owners alike not only the key role banking fills but also why banking needs as many advocates as possible right now.

GMJ: How does behavioral economics jibe with customer engagement?

Dr. Jacobe: That 2011 banking study also shows that individual banking companies have been able to significantly differentiate their customer engagement and loyalty over the past several years. Customer engagement is built on a hierarchy of responses, and the bare minimum of them is that the company executes and fulfills basic expectations. Banks that are too short-staffed don't have the people to do what banks are expected to do and keep wait times short, thus failing to meet customers' transactional requirements.

GMJ: How can banks engage their customers?

Dr. Jacobe: Customers become engaged only when four emotional needs are met: they feel pride and passion for the brand they bank with, they believe the bank has integrity, and they're confident they'll always be treated well and fairly. It's financially imperative that banks provoke this response. Fully engaged retail banking customers are much more likely to say they intend to open a new account or take out a new loan over the next three months than are actively disengaged customers. And actively disengaged customers are much more likely to switch banks.

It's very difficult to emotionally engage people who are irritated by being kept in line for a long time. And the customer-facing staff knows it -- they are quite capable of looking over the counter and seeing lines of impatient, angry customers. When that happens, bank employees can be forgiven for losing some of their own engagement, which has costs of its own. Disengaged bank employees are not good brand or banking ambassadors. They're brand killers. Banks need employees who are positive about their banking institution and positive about the role banking plays in making the economy function.

GMJ: What's your outlook for banking in 2012?

Dr. Jacobe: U.S. banks face a hostile environment in 2012. The European banking situation is likely to continue to remain volatile and unresolved. The U.S. economy is likely to continue to struggle. Most importantly, the intense political environment of the 2012 presidential election is likely to increase the demonization of the nation's banks -- and the regulatory activity of the new Consumer Financial Protection Bureau -- while ignoring the vital role banking plays in the U.S. and global economy.

I think it is important that bank management recognize all aspects of this operating environment -- including Americans' perception of the banking business -- as they make their strategic decisions in the year ahead. They need to recognize that their business decisions can become political issues and act accordingly. Most importantly, they need to think behavioral economics.

-- Interviewed by Jennifer Robison

When the fledgling Consumer Financial Protection Bureau recently collected consumer complaints about credit cards, one of the overarching themes was confusion over the terms of the cards. Whether consumers were complaining that their interest rate suddenly went up or that they were charged a penalty fee, it often came down to one thing: they didn't understand the contract. And in credit card land, using the card constitutes agreeing to the contract, so you're stuck.

Now the Consumer Financial Protection Bureau has developed a prototype contract it thinks will simplify the whole mess. The average credit card contract is about 5,000 words long! The new CFPB one is a little over a thousand. It doesn't do away with the fine print, necessarily. What it does is take all of the terms of art in the contracts and relegate them to a separate "definitions" page, so the lawyers will still be satisfied. By shunting that language elsewhere, the agreement itself can be written in plain English. In fact, the CFPB has consciously tried to write the new contract at a 7th grade reading level, to be as inclusive as possible.

Inevitably, though, the new format will not be perfect or perfectly understandable. And that's where YOU come in. The CFPB is asking members of the public to weigh in. It takes five minutes. You look over the form and answer some questions about what you think of it. Here's the link. The agency did the same thing with mortgage disclosures and got thousands of responses - including mine! I find it fascinating that a government agency is actually seeking public feedback in an interactive way that makes it easy for us to give and for the bureaucrats to analyze. I wanted to participate.

While people like us are weighing in, the new contract will also be test-piloted by Pentagon Federal Credit Union, a really active credit union with credit card customers nationwide. Unfortunately, the model contract--once smoothed out--is not slated to be mandatory. Credit card companies will have to opt in. Ira Rheingold of the National Association of Consumer Advocates believes they may balk at first. It is change, after all.

But he thinks most will eventually get on board, because a credit card agreement that simply states the basics like interest rate, cash advance interest rate and annual fee will allow consumers to shop and compare and choose the best deals. And competitive credit card companies are going to want a piece of that.

You might be thinking, "who cares about credit card contracts? Nobody reads them anyway." But if they were simple and direct, maybe we would. 

Unemployment is one thing, but getting charged to use the prepaid card your weekly benefits are on is another.

Just ask Shawana Busby, the out-of-work resident in South Carolina at the center of Janell Ross' Huffington Post write-up about Bank of America's latest indiscretion: charging the unemployed for using their prepaid cards out-of-network. Busby estimates she's paid about $350 in fees, despite the fact this is all she has to live on.

Bank of America may have just done away with its $5 debit card fee, but with states like South Carolina partnering with big banks to save on printing and mailing costs (an estimated $5 million in South Carolina's case, according to Ross), the unemployed, many of whom are unbanked, are feeling the fallout.

Writes Ross:

"In short, the same banks whose speculation delivered a financial crisis that has destroyed millions of jobs have figured out how to turn widespread unemployment into a profit center: The larger the number of people who are out of work and dependent upon the state for sustenance, the greater the potential gains through administering their benefits."

What do you think, is Bank of America back to its shady old tricks? Or does the bank provide a service to cash-strapped states?

Stuff like this didn't get the attention of the debit card fees, thus isn't being rolled back:

On May 24, Bank of America will raise the monthly fee on its most popular checking account from $8.95 to $12. On June 27, it will start charging customers a $35 fee if they overdraw their account by less than $10. And next year, the bank plans to replace its basic checking account with a new "essentials" account that comes with a monthly fee that cannot be avoided.

At Chase Bank, fees have increased for overdraft transfers, outgoing wire transfers and stopped payments. New customers that sign up for a basic checking account face a $12 monthly charge, up from $6.

Experts warn consumers to expect more of these and other moves by large banks to boost revenue.

Luckily, you can do something about it, like the 700,000 people who have moved to credit unions since October. So take out your cash and move it to non-profit or local community banks and credit unions. It'll save you money.

"A credit union is going to smoke a commercial bank every day of the week and twice on Sundays in the fee column," said John Ulzheimer, president of consumer education at SmartCredit.com. That's because, in contrast to commercial banks, credit unions operate as non-profits.

"Earnings... that the credit union makes devolve to the members in the form of lower loan rates, higher deposit rates and lower fees," said Tony Cherin, a professor emeritus of finance at San Diego State University.

Also, and this might be more important, move your credit card and auto loan debt.

Because of their non-profit structure, credit unions usually offer more competitive rates than big banks on things like credit cards and CDs. For example, Citi's Platinum Select Mastercard has a variable APR of between 12% and 22% (after an introductory APR of 0% for the first 21 months) compared with the 10% purchase APR offered by the Pentagon Federal Credit Union, according to Bankrate.com.

In the aftermath of Bank of America's new $5 monthly debit card fee, politicians, consumer groups, and plain old angry consumers have denounced such fees as unfair and arbitrary, and pleaded with BofA and other financial institutions to get rid of them. But instead of asking these banks to reverse their decisions, perhaps it's more productive to ask why it is you're doing business with them in the first place.

As soon as Bank of America announced its new debit card fees--$60 a year for debit card usages for most customers, even if you only swipe it once a month--the reaction has amounted to something along the lines of: Hey, you can't do that!

The wheels were soon in motion to see to it that banks would be unable to proceed according to plans. Consumers Union first called for a federal investigation of the new debit card fees, and later publicly urged BofA, Chase, Wells Fargo, and other institutions to kill off such fees. Meanwhile, local lawmakers around the country are trying to join the fight. A Florida legislator is imploring the state to ban the fee, for example, and a Massachusetts city councilman is trying to get a resolution passed that would remove all municipal funds held by Bank of America. (The latter move appears mostly symbolic; the city, Springfield, had only $3,580 in a BofA account.)

While the anger over the fees is entirely understandable, the way the battle is being fought may be a bit misguided. If a restaurant raised prices or added odd fees out of the blue, would you start protesting the moves as unfair? Or would you just stop going to that restaurant?

(MORE: Wall Street Protests Get Specific: Could 'Bank Transfer Day' Pit Americans Against Their Big Banks?)

The StarTribune's Eric Wieffering writes that banks are being unreasonable for thinking they have the right to overcharge for debit card usage, and consumers are being unreasonable for thinking they have the right to use debit cards without paying for the service in any way whatsoever:

The foot-stomping frenzy about debit card fees reminds me of a sandbox showdown between 2-year-olds.

The Los Angeles Times' Michael Hiltzik is of the opinion that consumers should actually be thanking Bank of America because unlike so many other opaque, sneaky fees, the new debit card charge is upfront--and therefore easier to understand and avoid:

It's always best for consumers to know what they're paying for and how much, because customers can then shop around for cheaper services.

(MORE: Are Debit Card Fees Meant to Get Customers to Use Credit Cards More?)

Yahoo Finance's Dan Gross is another expert who welcomes debit card fees because, all things considered, it's better for everyone if banks charged for services used directly by customers, rather than trying to make money by gathering all the customer deposits possible and lending those funds recklessly to hedge funds, unqualified home buyers, and other banks. What's more, the rise of debit card fees should make it plain that bigger banks don't necessarily have better banking services:

Big banks' efforts to make banking more expensive might provide an opportunity for smaller, better-managed credit unions and community banks -- you know, the guys who didn't blow up and require government support -- to get a leg up on their much larger competitors.

So instead of stomping your feet in anger about bank fees, why not just shop around? Bloomberg cites a new survey revealing that 30% of consumers would switch banks due to debit card fees. Even more customers would avoid the fees in other ways: 43% said they'd start paying with cash or credit cards rather than debit card fees. (Interestingly enough, the banks may be pushing debit card fees to entice customers to switch to credit cards.) According to the survey, the poorer you are, the more likely you are to stick with your bank even if it starts charging debit card fees: 22% of low- to middle-income consumers (annual household incomes of $35,000 to $49,000) said they'd be willing to pay the fee, compared to just 14% of consumers with incomes over $100K.

The poorer you are, the more these fees hurt. So why would less well-off individuals be more willing to pay them? Because these people feel like they have fewer banking options, according to survey analysts.

In fact, there are other options. And in fact, since the debit card fees made news, consumers have been shopping around and switching banks in large numbers. Small banks and credit unions have seen an uptick in new customer accounts, as have online banks with minimal fees and decent interest rates (relatively speaking) such as PerkStreet Financial, ING Direct, and Ally Bank.

(MORE: How to Divorce Your Bank in 5 Easy Steps)

The point is: If you don't want to pay absurd bank fees, you could sign a petition or write your congressman or plot a campaign to try to get your bank to change its policies. Then again, you could also just start banking with an institution that doesn't charge ridiculous fees.

People are angry at the proposed debit card fees and nearly one-in-three consumers say they will take their money elsewhere.

According to a new study by The Research Intelligence Group, 30% of banking customers say they will leave their institution should the bank start charging a monthly fee for debit card use. This anger is even more pronounced with younger (35%) or more affluent (37%) consumers.

Another 43% of consumers said they would choose a different method of payment. 28% said they would pay by cash, while 15% claimed they would use a credit card.

Regions and SunTrust have already started assessing a monthly fee on debit card usage. Bank of America will begin charging a $5 per month fee in 2012. Chase (one state) and Wells Fargo (five states) are testing this fee in various areas.

The survey was performed by The Research Intelligence Group from a representative sample of 1,000 U.S. adults in early October.

Consumers do not like paying a monthly fee for using their own money. These fees are also being assessed by some banks that we, the taxpayers, bailed out a few years ago.

Lawmakers are also upset.

After Wells Fargo announced a 21% increase in their third quarter profits, Senator Dick Durbin sent a letter asking the bank's CEO to explain the need for a new debit fee. Durbin had previously sent a letter to Bank of America, reprimanding the bank after it announced plans to charge consumers for debit card usage.

Provided by LowCards.com

Bill Hardekopf, Contributor

Wells Fargo & Co. executives said Monday that they expect new limits on the fees banks can charge retailers for processing debit card transactions to cut earnings by $250 million per quarter.

A federal regulation capping those fees kicked in on Oct. 1, so the actual impact will be clearer when the bank reports its fourth-quarter results in January.

During a conference call to discuss third-quarter results, Chief Financial Officer Timothy Sloan said the bank hopes to replace about half of the projected loss through increased debit card use and what he called "product changes."

Among those potential changes is a fee charged to customers when they use the cards. While rival Bank of America has gotten the most attention for this tactic after revealing that it will charge debit card users $5 per month to offset the lost merchant payments, Wells Fargo is also testing a fee of $3 in certain markets.

CEO John Stumpf responded to one analyst's query about the fees during the call.

Q. Bank of America's $5 fee, by my calculation, would recoup most of the loss from the regulation. Why are you more guarded and guiding that you can only recover half?

A. The way we think about that is, our focus is on building lifelong relationships with our consumers. We have grown checking and savings account dollars by $185 billion in three years.

That represents consumers responding to the value, the convenience and the choice we are giving. We have 12,000 ATMs, we give free online and free bill pay and these sort of things. When you talk about how we're going to get paid for that, we're testing things, and we're going to learn.

Our customers help us understand how they want to pay for that value, that choice and that convenience. We will learn from the tests, and we'll do what we think will be appropriate so we continue to grow our customer base.

Raleigh, N.C. -- Dontarius Dawkins is on a tight budget and says it will be even tighter when he has to start paying $5 a month to use his Bank of America debit card.

"Five dollars adds up every month, considering I'm a college student, so I really don't have $5 a month to pay"" Dawkins said Wednesday.

Bank of America announced late last month that it plans to start charging debit card users a monthly fee starting early next year.

The move comes as new laws cut the fee banks can charge merchants for debit transactions.

Anne Pace, a Bank of America Corp. spokeswoman, said that customers will only be charged the fee if they use their debit cards for purchases in any given month. Customers won't be charged if they only use their cards at an ATM.

The fee will apply to basic accounts and will be in addition to any existing monthly service fees. For example, one of the bank's basic accounts charges a $12 monthly fee unless customers meet certain conditions, such as maintaining a minimum average balance of $1,500.

A fee for using debit cards is still a novel concept for many consumers and was unheard of before this year, but there are signs it may soon become an industry norm.

SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Regions Financial, which is based in Birmingham, Ala., plans to start charging a $4 fee next month.

Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets. Neither bank has said when it will make a final decision on whether to roll out the fee more broadly.

U.S. Rep. Brad Miller told WFMY News that the fees should be illegal. In response, he has proposed the Freedom and Mobility in Banking Act, which would give customers the right to close an account at any time, even over the phone or the Internet, at no charge.

Due to the fee, Roger Goodwin is considering leaving Bank of America and getting an account with a local credit union.

"They do not have fees, and I also have an account with another bank that is also going to start charging for checking," Goodwin said.

Leigh Brady with the North Carolina State Employees' Credit Union, said the company has seen an increase in new accounts in the last week, which might be a result from Bank of America and others charging new debit fees.

"As a credit union, we are not in the business to make money. We are a not-for-profit cooperative," Brady said. "Credit unions tend to be a better value for consumers ... in terms of offering lower fees and better interest rates."

Coastal Federal Credit Union said it has also seen increased interest, and the company plans to lure in frustrated Bank of America customers by rewarding them with a higher interest rate on checking accounts.  

• Reporter: Tara Lynn
• Web Editor: Kathy Hanrahan

By TARA SIEGEL BERNARD and BEN PROTESS

Published: September 29, 2011

Bank of America, the nation's biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases. It was just one of several new charges expected to hit consumers as new regulations crimp banks' profits.

Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee.

The round of new charges stems from a rule, which takes effect on Saturday, that limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, is a crucial part of the Dodd-Frank financial overhaul law.

Until now, the fees have been 44 cents a transaction, on average. The Federal Reserve in June agreed to cut the fees to a maximum of about 24 cents. While the fee amounts to pennies per swipe, it rapidly adds up across millions of transactions. The new limit is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That comes on top of another loss, of $5.6 billion, from new rules restricting overdraft fees, which went into effect in July 2010.

And even though retailer groups had argued that lower fees were important to keep prices in check, consumers were not likely to see substantial savings. In fact, they are simply going to end up paying from a different pot of money.

Or as Jamie Dimon, chief executive of JPMorgan Chase, put it after passage last year of the Dodd-Frank Act, "If you're a restaurant and you can't charge for the soda, you're going to charge more for the burger."

Chase is now charging customers for a paper statement. It also, like many other banks, scrapped its debit card rewards program. And customers that Chase inherited from Washington Mutual no longer enjoy free checking accounts.

The bank is also exploring a number of other fee increases, including for online banking, according to people with knowledge of the matter.

Bank of America's debit fee is steeper than most of its competitors', reflecting the broader challenges the bank is facing after the financial crisis. The bank has introduced an online-only account that charges customers for doing business at a local branch. It also plans to apply its new debit card fees to anyone who uses the card to make recurring payments like gym fees or cable bills.

Citibank is one of the few that said it would not introduce a charge for debit card use. "We have talked to customers and they have made it abundantly clear that 'if you charge me to use my debit card, I would find that very irritating,' " said Stephen Troutner, head of Citi's banking products. Still, the bank has made it more difficult to qualify for free checking, among other moves.

Earlier this year, Wells Fargo estimated that the Durbin rules would cost the bank $250 million in revenue every quarter. It hopes to make up half that gap with a variety of new products and customer fees, including the monthly debit card fee of $3. The change is part of a "pilot program" the bank will begin on Oct. 14 in five states across the country, including Washington and Georgia. As of Saturday, the bank will discontinue its debit card rewards program.

Meanwhile, HSBC said that it recently increased an A.T.M. fee -- to $2.50 from $2 -- for certain customers when they used a competitor's A.T.M. It also recently introduced a debit transaction fee of 35 cents, though the first eight transactions are free.

And at TDBank, customers will now have to pay $2 for using A.T.M.'s outside their network.

"Durbin essentially moves the cost of debit away from merchants, and now it's more focused on consumers," said Beth Robertson, director of payments research at Javelin. "There are all sort of things happening where banks are saying, where can we put fees in place for our service to generate revenue or how can we reduce our costs?"

Over the last few years, consumers have increasingly shifted their spending to debit cards from credit cards, in large part to curb their spending. But some analysts predicted that the new fees could prompt consumers to return to credit cards -- a more lucrative alternative for the banks.

Consumers have already begun to react to the changes.

Patrick Shields, 48, said he had decided to leave Citibank, where he has held a small-business account for his residential window cleaning business since 1986. He was contemplating opening a personal checking account, but realized he could do better at a credit union.

"At the credit union, they opened it free of charges, which Citi could not and would not do," said Mr. Shields, who noted that a personal checking account would have cost more than the one he uses for his New York business. "Now I have both accounts covered, and I am fee-free."

The so-called Durbin rule quickly emerged as one of the thorniest provisions of Dodd-Frank, touching off a long and furious fight in Washington. Wall Street dispatched an army of lobbyists to tame the rule, ultimately yielding mixed results.

In June, the Senate defeated a measure that would have delayed the new rule. But just three weeks later, the Federal Reserve decided to cap the fees at 21 to 24 cents for each debit card transaction, a much lighter blow than once expected.

In a statement on Thursday, Senator Durbin, Democrat of Illinois, said that small businesses would benefit from the new limits. "Swipe fee regulation will still allow banks to cover the actual costs of debit transactions but will rein in the banks' excessive profit-taking."