The Durbin Amendment was created to “protect” retailers and gave the Federal Reserve the power to set interchange fees for debit card transaction processing.  The idea is lower debit card fees would improve economic growth, since retailers could lower prices on items when they pay lower fees to banks for accepting debit cards, and lower prices would result in more consumers buying. The debit card transaction fee was 44 cents per transaction before the amendment, and has been capped at 21 cents as a result of the Durbin Amendment.

Plaintiffs Arguing Against the Durbin Amendment

The following are among the plantiffs in the legal action against the Federal Reserve over the failings of the Durbin Amendment:

• National Retail Federation
• National Association of Convenience Stores (NACS)
• Boscov’s Department Stores
• Miller Oil Co
• Food Marketing Institute

Their argument is that the interchange fees for debit cards do not comply with the Durbin Amendment, and that the amendment is heavily influenced by the banking industry which results in higher expenses for small retailers instead of the promised lower expenses the amendment was supposed to bring. Small ticket items are now being charged heavier debit card swipe fees than they were prior to the amendment because the amendment allows issuing banks to include fees on top of the debit card transaction fee.  The 12 cent cap on debit card swipe fees is now increased to 21 cents plus .05% of transaction value once issuing banks add in their fees.

The Durbin Amendment only limits fees that banks can charge on debit card processing transactions – and doesn’t require that third party companies reselling bank merchant account services pass on the fee savings to merchants.  The majority of merchants rely on third party companies for processing credit cards, which means the third party companies benefit from the lower fees paid to banks for debit card processing fees – while charging their customers (the small business retailer) the same fees they did before the amendment was passed.

Use our comparison chart to see which processors have reduced their fees after the Durbin Amendment. Maybe it’s time to switch and save?