The Durbin Amendment

The recent Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 had largely no affect on the merchant account side of the banking business. That is, until the Derbin Amendment was attached and pushed through.

I recently had the opportunity to see Senator Christopher Dodd speak at ETA, and he explained how the amendment was pushed through at the last minute - nobody really paid attention to it, and it just got passed along with everything else.

The Durbin Amendment has some major ramifications to the payment processing industry. Specifically:

1. A cap of 7 to 12 cents on most debit card swipe fees, a decline of about 80% from present levels


2. The introduction of competition, by giving merchants a choice as to which debit network they process transactions over. For example, present arrangements effectively force merchants to process many Visa transactions over the STAR network, even if competitors like PULSE and NYCE offer to conduct the same transaction at a lower processing price.


3. Merchants can impose a $10 minimum on credit card transactions (this number can be adjusted by the Fed as they see fit). Previously, Visa and MasterCard banned this practice in their merchant agreements.


4. Merchants are allowed to give discounts at the register to those who pay with cash or debit cards. Previously, Visa and MasterCard banned this practice in their merchant agreements.

Of course, anybody who makes their money from selling merchant accounts is unhappy about this. The amendment is under review, according to Senator Dodd, so we may see changes in the future, but that will most likely take some time.

A great article about this amendment can be found here (and some of the information in this blog was taken from this article): http://www.nerdwallet.com/blog/2011/durbin-amendment-explained/