The Durbin Amendment, Section 1075 of the Dodd–Frank Wall Street Reform and Consumer Protection Act, required the Federal Reserve to limit fees charged to retailers for debit card processing.
For merchants, Durbin is acceptable. The amendment’s interchange price cap affects card issuers with more than $10 billion in assets, which enables merchants to pay less in debit card acceptance costs. For debit card issuers, which receive the interchange paid by merchants, Durbin is unacceptable.
Republicans opposed Dodd-Frank in 2010. Now it’s expected some changes would be made to the amendment or it could be abolished. Repealing the Durbin Amendment is among this year’s priorities of the Financial Services Roundtable, the Washington, DC-based national lobbying group for big financial institutions.
According to the FSR’s statement, the distortion of the free market has led to price reductions, as promised by merchants, for consumers and there has been a decrease in certain banking services like free checking and debit rewards.
Alison Hawkins, the FSR’s vice president of communications notes they are for the repeal of the entire Durbin Amendment. According to Hawkins, the government shouldn’t have used the price controls and the manipulation of transaction routing to intervene into the operation of the payments system and negotiations between private parties.
The Durbin Amendment for Merchants
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According to the Durbin Amendment, every debit card should offer a merchant to choose between at least two unaffiliated debit networks with each transaction. This means the majority of US debit cards can get access to the brand of a global network like Visa or MasterCard displayed on the front of the card for transactions requiring a signature, and an electronic funds transfer network like Shazam for transactions requiring a PIN.
The debate about transaction routing has been limited mostly to financial institutions and merchants. Many merchants are for the Durbin routing requirements.
According to Senator Dick Durbin, repealing swipe fee reform would have an awful effect for Main Street merchants, consumers and competition. It would be a huge $8 billion-per-year giveaway for Visa, MasterCard, Wells Fargo and other big banks at the expense of local grocery stores, gas stations, retailers and the customers who support them.