Durbin Amendment

What Is the Durbin Amendment?

The Durbin Amendment is a part of the [Dodd-Frank Wall Street Reform and Consumer Protection Act](/dodd-frank-financial-administrative reform-bill) that limits transaction fees forced upon merchants by debit card issuers. The amendment, named after U.S. Representative Richard J. Durbin and presented in 2010, proposed to confine these interchange fees, which averaged 44 pennies for each transaction at the hour of proposal. The Durbin Amendment decreased transaction fees to 21 pennies plus 0.05% of the transaction value for banks with $10 at least billion in assets.

Grasping the Durbin Amendment

The amendment was proposed on the conviction that interchange fees were not reasonable and proportional to card issuers' costs. At the point when the bill became law in 2010, it capped interchange fees at 21 pennies for each transaction plus 0.05% of the transaction amount. A few banks executed new fees and wiped out free services trying to offset their interchange fee revenue losses.

The amendment additionally considers covered banks to receive an adjustment for fraud prevention costs in the amount of one penny.

Impact on Commerce and Banking

There is a few discussion about the viability and impact the amendment has had on consumers, retailers, and banks. The people who have called for the amendment's nullification have refered to a situation where bigger retailers have not given the expected savings to consumers and on second thought brought rates up in alternate ways.

A portion of the new fees presented remembered high fees for deposit accounts, increased punishments for inadequate funds, and month to month maintenance charges for accounts that don't keep a higher [minimum balance](/least balance) than was recently required.

Such claims likewise declare that more modest retailers under the Durbin Amendment lost a portion of the pricing benefits they recently delighted in compared with their bigger opponents. Already there was flexibility on interchange fees, which let a few retailers appreciate discounts on certain cheaper things, which permitted them to hold more profits.

The Durbin Amendment's initial proposal was a cap of 12 pennies for interchange fees for debit card transactions.

Banks have guaranteed that the cap on fees limits their ability to reinvest in themselves in alternate ways, for example, offering free checking accounts as options to their customers. Debit card reward programs might have been killed also by certain banks.

While the amendment impacted debit card utilization, comparable fees on credit card purchases were not impacted. This has prompted increased rewards from certain banks for credit card utilization since they offer a better opportunity for the institution to bring in money.

There have been a few efforts to present comparative changes for all supposed swipe fees no matter what the type of card utilized in the transaction.

With the discussion progressing, there have been efforts in Congress to revoke the amendment, a campaign backed by more modest retailers and some community banks and credit unions.

Highlights

• The Durbin Amendment applies to financial institutions with $10 at least billion in assets. Institutions with under $10 billion are exempt.
• The amendment is named after Senator Richard J. Durbin who presented it as part of the reforms.
• As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Durbin Amendment limits transaction fees forced upon merchants by debit card issuers.
• There have been many calls for the cancelation of the Durbin Amendment as numerous retailers, banks, and consumers accept the amendment adversely affects banking and commerce.
• Transaction fees are limited to 21 pennies plus 0.05% of the transaction value, which is down from the average of 44 pennies when the rule was enacted in 2010.

FAQ

How Did the Durbin Amendment Respond?

The Durbin Amendment limits the transaction fees a responsible bank can charge a merchant when a customer utilizes a debit card, known as interchange fees. The amendment was passed as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The amendment limits the transaction fee amount to 21 pennies plus 0.05% of the transaction value.

When Did the Durbin Amendment Take Effect?

The Durbin Amendment came full circle in October 2011.It was passed in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act as proposed by Senator Richard J. Durbin.

What Are Interchange Fees on Debit Cards?

An interchange fee is a fee that card issuers charge merchants for processing customer transactions that are paid for with a credit or debit card. The interchange fees are intended to cover the costs associated with processing card transactions.