Durbin Amendment Update

The Durbin Amendment has been making news headlines since its adoption and passing in conjunction with the Dodd-Frank Wall Street Reform Act. Last week, the Federal Reserve Board (the Fed) announced debit card processing caps and network exclusivity rules that will go into effect October 1, 2011. Currently, the rules do not differentiate between signature and PIN debit. This means that check cards, whether used as a Visa/MasterCard signature transaction or a PIN transaction, are subject to the same regulations.

Interchange will be capped at 0.05% and $0.21 per transaction. Also, it has been indicated that issuers who are compliant with the Fed’s fraud prevention standards may be allowed up to an additional $0.01 per transaction, provided the Fed issues an additional rule.  No word has come yet from debit card issuers or the networks advising how they plan to implement these changes, but we will keep you informed as new information becomes available.

In addition to capping debit Interchange, effective October 1, 2011, the Durbin Amendment also prohibits networks from restricting the number of available debit networks to less than two unaffiliated networks.  That could mean two or more unaffiliated PIN networks (like Star, Nyce, Interlink, Jeanie, etc) or, in regards to check cards, one signature network (like Visa or MasterCard) and at least one unaffiliated PIN network.  Also, card networks may no longer route transactions to a particular network based on exclusive or preferential agreements with issuers. 

According to the Durbin Amendment, only issuers with $10 billion or more in assets will be regulated by these rules.  Even though about 100 banks qualify at that level, their cardholders account for approximately 75% of debit transactions.  Although there are additional rules being reviewed to appropriately implement the regulations called for by the Durbin Amendment, we wanted to provide you with this information.  We are currently reviewing how your merchants’ pricing and our mutual margin goals will be affected, and we will continue to provide more information as it becomes available

In the interim, if you have any questions regarding the Fed’s decisions, please visit:

Thank you.