Durbin Amendment

The Durbin Amendment, formally Section 1075 of the Dodd-Frank Act, was enacted to reduce debit card interchange fees that lawmakers considered excessive. Prior to Durbin, debit card interchange averaged 1.14% plus $0.13 per transaction. The regulation caps regulated debit card interchange at $0.21 base amount, plus 0.05% of the transaction value (ad valorem component), plus an additional $0.01 for issuers meeting fraud prevention standards, resulting in an effective cap of $0.22 plus 0.05% for compliant issuers.

The regulation applies only to debit cards issued by regulated financial institutions—those with $10 billion or more in assets. This creates a two-tier system where debit cards from large banks like Chase, Bank of America, Wells Fargo, and Citibank qualify for capped Durbin rates, while debit cards from smaller banks and credit unions remain on unregulated interchange schedules that can exceed 1.00% plus per-transaction fees. Credit cards are entirely exempt from Durbin caps, regardless of issuing bank size. Prepaid cards have mixed treatment depending on specific network categorization.

For merchants, the Durbin Amendment significantly reduced costs on regulated debit transactions, creating a substantial cost difference between debit and credit card acceptance. A $100 transaction processed with a regulated debit card costs approximately $0.27 in interchange, compared to $2.00-$3.00 for a typical consumer credit card. This price differential incentivizes merchants to encourage debit card use through minimum purchase requirements, surcharges, or rewards programs. However, merchants cannot differentiate pricing based on card issuer size, meaning they cannot charge different prices for regulated versus non-regulated debit cards.

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