Did You Know the Durbin Amendment Impacts Every Single Debit Transaction?

How familiar are you with the Durbin Amendment? This much buzzed about effort impacts consumers every time they swipe their debit cards.

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in response to the effects of the Great Recession. This complex piece of reform legislation created new regulations for lenders and banks to protect consumers and prevent future economic recession.

One component of the Dodd-Frank Act was the Durbin Amendment (also known as Reg II) that directed the Federal Reserve Board to set rules to control costs associated with PIN/debit transactions. The intention of the Durbin Amendment was to cap the debit fees that retailers had to pay to financial institutions, in turn passing along the savings to consumers.

“Credit unions and banks with assets less than $10 million are exempt from the price controls but are subject to routing and exclusivity requirements,” wrote the Credit Union National Association (CUNA). “These requirements have driven down the revenue that all credit unions receive from PIN/debit transactions.”

Supporters of the amendment, which was sponsored by Sen. Dick Durbin, D-Ill., advocated that costs to consumers would be lowered by retailers passing on their savings to consumers. However, the amendment has caused some unintended consequences. While some retailers did do this, many didn’t see a significant enough difference to lower their costs. In fact, according to a 2014 survey conducted by the Federal Reserve Bank of Richmond, 98% of retailers either maintained or raised their prices following the passage of the Durbin Amendment.

“While Synergent credit unions are not directly impacted by the interchange cap associated with Durbin due to their asset size, they are directly impacted by other facets of the amendment, including the non-affiliated network provision,” explained Rebekah Higgins, Synergent Payment and Fraud Consultant. “Our mission is to assist credit unions with network and transaction routing strategies to ensure they are gaining the best possible revenue from their debit cards to help offset the ever growing costs associated with offering this vital service to members.  We continue to monitor both the legislative and payments landscapes to safeguard credit unions and help them navigate these complex and constantly changing environments.”

What’s Happening with the Durbin Amendment?

In the years since Dodd-Frank was passed, efforts have been made to repeal many of the regulations put into place by it, including the Durbin Amendment. Earlier this year, retail trade organizations filed a lawsuit against the Federal Reserve Board of Governors disputing the interchange fee cap set by Durbin. The Credit Union National Association (CUNA) continues to support a full repeal of the Durbin Amendment.

In May of 2021, five financial trade associations, including CUNA and the National Association of Federally-Insured Credit Unions (NAFCU), issued a joint statement on the Federal Reserve’s decision to revisit the Durbin Amendment:

“The Durbin Amendment has been flawed from the beginning, making it harder for banks and credit unions to serve consumers, causing unintended consequences for financial institutions and failing to deliver on its promise to lower retail prices. The Fed’s decision to revisit Reg II risks causing even further consumer harm. The Fed’s own study of debit card transactions, both in person and online, shows that merchants and consumers are increasingly benefitting from significant investments in innovation and fraud detection embedded in the nation’s payment rails today. By reopening the rules surrounding debit card transactions, the Fed could put the convenience, safety, and security that Americans have come to expect when they use their debit card at risk. We will vigorously oppose any attempt to undermine the payments system at the expense of consumers.”

Most recently, on July 26, 2021, CUNA News published an article entitled, Durbin Amendment expansion would undermine payments ecosystem. It reads:

CUNA joined other organizations Monday to express strong opposition to any expansion of the Durbin Amendment, which caps interchange fees. The letter was sent to leaders of the House Financial Services Committee and the Senate Banking, Housing, and Urban Affairs Committee.

Retail organizations called for the Durbin Amendment cap to be extended from debit cards to credit cards in a June letter.

“Support for any legislation on this topic would undermine the overall health and security of the U.S. payments ecosystem and have significant negative implications for consumers and small businesses at a time when the U.S. economy is just starting to recover from a global pandemic,” the letter reads. “Already, the COVID-19 pandemic and resulting regulations created a $250 billion wealth transfer from small businesses to big-box retailers—and an expansion of the Durbin Amendment would only further widen that gap.”

The letter also notes:

  • Legislation in this space is unnecessary because the payments industry is more competitive than ever, with new players entering all the time, giving consumers and merchants a range of options.
  • This effort by merchant groups to shift billions of dollars of consumer credit card spending to less secure, less innovative, and higher-risk transactions would make America’s payment system worse and put consumers in a vulnerable position.
  • Having the government take away consumers’ choice to pick their credit card, and give it to large merchants, is fundamentally wrong.
  • The Durbin Amendment is a failed government policy, leading to consumer prices increasing, far fewer community banks and credit unions across the country, and several small debit networks going out of business.
  • The merchant proposal would reduce availability of credit to U.S. consumers and small businesses.
  • Congress should not require the reengineering of the entire payments system just to benefit a small group of the largest retailers, while causing small businesses to suffer.

Staying Informed

CUNA and leagues across the country are currently working to ensure interchange regulation is not extended to credit card programs. Recently, CUNA solicited input from credit unions with credit card programs in a credit card interchange regulation survey.

“Being able to quantify costs and returns on credit union credit card programs, as well as how potential regulations will impact credit unions and members will give us valuable insight as we continue our urgent and proactive efforts against expansion of interchange programs,” said Kristina Grebener, CUNA Vice President of Market Intelligence.

Staying informed and providing input whenever possible are actions you can take moving forward. If you have any questions regarding the Durbin Amendment, please contact Rebekah Higgins directly at