Passed in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Durbin Amendment empowered the federal reserve to cap interchange fees at a “reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” Senator Durbin (D-IL) believed that by capping interchange fees, small businesses would face lower costs, which could be passed onto consumers.
Despite Senator Durbin’s beliefs, his amendment has not lowered costs for consumers. Instead, the Durbin amendment has diminished consumer welfare and fundamentally changed the debit card transaction ecosystem. Unfortunately, there are new efforts that seek to expand the scope of the Durbin amendment to cover online debit and credit card transactions. For consumers, this would be a step in the wrong direction.
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