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Aug 19

What are the Durbin Credit/Debit Card Interchange Reform Amendments?

Summary of Durbin Credit/Debit Card Interchange Reform Amendments


Durbin-Leahy-Landrieu Amendment (#3771) stop credit/debit card networks from imposing anti-competitive restrictions on the small businesses, merchants and government agencies who accept their cards.

  • With this amendment, Visa and MasterCard could no longer use their dominant market power to force those who accept their cards to also agree to anti-competitive restrictions on the discounts they can offer and on their ability to choose the forms of payment they accept.
  • The amendment would say that sellers can do the following things without being threatened or punished by card networks like Visa and MasterCard:

- Offer discounts to customers to use a competing card network (e.g., the amendment would let a store that accepts Visa offer a discount for a customer to use MasterCard or Discover. Visa currently prohibits such discounts);

- Offer discounts for use of cash, check, debit card or stored- value card (current law does not fully ensure that merchants can offer these discounts); and

- Set a minimum or maximum transaction amount for payment by card (small businesses lose money on transactions when they cannot set these amounts).

  • This amendment does not involve any government regulation of interchange fees. All it does is allow more market-based competition and more discounting options for consumers.

Durbin Amendment (#3769) to ensure that Interchange fees charged for debit cardtransactions are reasonable and proportional to the costs incurred in processing the transaction.

  • With this amendment, Visa and MasterCard will be prevented from continuing to increase debit card interchange fee rates, which currently amount to 1% — 2% of to transaction amount even though the actual cost of processing a debit transaction is far less.
  • The amendment would direct the Fed to issue regulations to ensure that interchange fees imposed on debit card transactions be “reasonable and proportional” to the cost incurred in processing the transaction. (The rules would have a carve-out for small bank debit cards).

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