The Durbin Amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act is set to be official in a little over a month. The amendment would have the Federal Reserve limit interchange fees on debit transactions, the fee a bank charges to process card transactions, to a mere 12 cents. It’s a proposal they put out for comment late last year and it’s drawn a lot of criticism. There are two alternative interchange fee standards:
- Fee standard based on the costs with a safe harbor at 7 cents per transaction and a cap at 12 cents per transaction.
- A standalone cap at 12 cents per transaction.
By the Fed’s own calcluation, this is 70% lower than the 2009 average and the rule is set to take effect on July 21st, 2011. In addition to putting this 12 cent hard cap, the regulation would prohibit an issuer from restricting on which networks the debit transaction could be processed
What does this mean for consumers? If the banks are to be believed and 12 cents is below the cost of doing business, banks will severely curtail the use of debit cards or find some other way to charge for the convenience of debit cards, which generates $16 billion a year. If you rely on your debit card, you may find that there will be new fees or restrictions associated with it if the banks are to recover some of this revenue.