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Durbin Amendment: Limit Interchange Fees to 12 Cents

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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.

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50 Responses to “Durbin Amendment: Limit Interchange Fees to 12 Cents”

  1. Chris says:

    I just attended the 2011 Smart Card Alliance in Chicago and one of the panel discussion was a point/counterpoint on the Durbin Amendment.

    By and large, ALL payment transaction entities other than the merchants (banks, processors, issuers) are against the legislation and for obvious reasons. But while this is all being portrayed as being GOOD for the consumer, all it means is that banks/issuers are going to kill all but the top tier “rewards” programs and then sift whatever fees they collected form transactions, onto the average banker. So, if you can’t maintain the minimum (now higher) balance in your checking account, say goodbye to free, or reduced fee checking and say hello to any of the following possibilities:
    - ATM charges at your own branch ATMS
    - New or higher fees for checking and most especially fines for any checking violations
    - Fees for things like checks
    - Credit cards will likely now come with an annual fee in addition to you losing your rewards
    …anything their imagination can come up with.
    So, thanks Durbin. For the infinitesimal decrease in goods/service charges that merchants will pass back to the customer, we all get to enjoy higher back end banking fees.

  2. Rob says:

    Dick Durbin (democrat) did this. Remember folks – liberalism ALWAYS generates the exact opposite of it’s stated intent. No more rewards. Thanks Dick.

  3. Anonymous says:

    Yea, this will increase fees to consumers and also “chill” business. How many times have you found it convenient to pay for items by swiping — no more . . . SO in the end it is just another example of how government regulations cost you money and slow the economy.


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