What Impact Does the Durbin Amendment Have on Credit Card Processing?

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The Durbin Amendment was passed in 2010, but its now receiving a lot of renewed attention thanks to a bill aimed at repealing it. Since this amendment directly affects the credit card processing industry, we want to dig a little deeper and fill you in on what exactly this means for small businesses.

Why the Interest in Repealing the Durbin Amendment?

Views of this amendment are strongly split between two main sides. Huge banks, along with their lobbyists, are the ones in favor of repealing the amendment. Their interest stems from the fact that it “cuts into bankcard revenue and forces the weight of the quest for profits on to the shoulders of the economically disadvantaged consumer,” according to CardFellow.com. From the big banks’ point of view, the amendment has forced them to raise fees over the years and increased the number of people in the United States who don’t utilize a bank account.

The other group, which is actively working to prevent the amendment from being repealed, includes large retailers and related interest groups. They’re interested in the amendment’s potential to reduce credit card processing fees, achieved through pricing caps and transaction routing.

So, where do small and medium businesses stand in this debate? While some owners may have an opinion on the Dodd–Frank Wall Street Reform and Consumer Protection Act that the amendment was included in when it passed in 2010, most businesses that are smaller in size don’t feel any direct effects from this amendment.

Digging Deeper Into the Durbin Amendment

There are several different elements of the Durbin Amendment – a debit interchange cap tops the list. Its impact on this fee is tied to the size of the bank. Although small banks aren’t capped by the amendment, large ones are. The amendment also prevents network exclusivity through unaffiliated debit network routing.

Even though interchange fees are often referred to as swipe fees, that term isn’t accurate. Many of the interchange regulations related to this amendment don’t have anything to do with a card being swiped.

The Bottom Line

Both sides are currently doing their best to make a strong case for why to uphold or repeal the Durbin Amendment. For example, the Electronic Payment Coalition claims merchants have received $8 billion a year in windfall, but 76 percent of retailers raised prices on products or kept them the same.

As a consumer and business owner, the outcome of this debate is unlikely to directly impact your daily activities. However, it is a good reminder of just how much fees can add up over the long-term. So if you can’t remember the last time you compared your current credit card processor to what else is available, we highly recommend using our processing comparison list to do so.

Posted on Wednesday, March 8th, 2017