[11] An issuer eligible for this adjustment, could therefore receive an interchange fee of as much as 24 cents for the average debit card transaction (valued at $38),[11] according to the Federal Reserve. The Boards proposed rule would require banks that issue debit cards (issuers) to give merchants a choice of debit networks for transactions made online and in circumstances where consumers pay without physically presenting their debit cards. Even assuming a low rate of 1% for acceptance costs would mean that Amazon paid $2.2 billion in fees. Everybody can count on an unrivaled, secure, stable and reliable customer experience, thanks to a network with virtually unlimited capacity, capable of handling very large bandwidths. In Montana and across the country, electronic payment methods are more essential than ever before. The proposal leaves unchanged the amount of interchange fee that issuers and network may charge for debit card transactions. The fee is related to a transaction where either the merchant or the account being debited is outside the United States. [14], The American Bankers Association opposed the rule because it represents an "unprecedented transfer in costs from retailers to consumers the result of government price fixing" leading to "consumers paying higher fees for basic bank services. 601 note). The Durbin Amendment requires the Board to: prescribe regulations providing that an issuer or payment card network shall not directly or through any agent, processor, or licensed member of a payment card network, by contract, requirement, condition, penalty, or otherwise, restrict the Everything You Need to Know About the Durbin Amendment - FreshBooks For example, a network-branded general purpose reloadable card that is not marketed at a retailer as a gift card or gift certificate is exempt from the interchange fee restrictions if the funds are only accessible through the card and the card program does not permit the cardholder to access the funds through other means, such as writing checks or initiating ACH transactions. The Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance, including pioneering work in pre-dispute arbitration programs. Section 920 is codified at 15 U.S.C. But, because of a host of factors, including the Durbin Amendment to the 2010 Dodd-Frank Act, that is exactly what's happening. In addition to the rule text, Appendix A to the rule sets forth official Board commentary to certain provisions of the rule. This portion of section 920 limiting the interchange fee that an issuer may receive from or charge to a merchant does not apply to interchange fees of debit card issuers with total assets below $10 billion. Hamstringing the two biggest and most efficient issuers would do little to reduce consumer costs while making it more difficult for low-income households to obtain credit. The prohibition on network exclusivity applies to electronic debit transactions performed with any debit card as defined in section 235.2 of Regulation II, regardless of the form of such debit card. If ultimately implemented, this rule would amplify the damage of the flawed Durbin Amendment, which never delivered on its promise to lower retail prices for consumers. 1693o-2, that requires the Federal Reserve to limit fees charged to retailers for debit card processing. Section 920 of the Electronic Fund Transfer Act (EFTA) was added by Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.2 It contains several provisions related to debit cards and electronic debit transactions. 235, went into effect, a coalition of merchants sued the Federal Reserve. 1693o(c); 12 C.F.R. Last edited on 7 September 2022, at 01:38, National Association of Convenience Stores, Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, "Regulation II: Debit Card Interchange Fees and Routing", "What the Durbin Amendment Means for You", "Judge strikes Fed's cap on debit 'swipe' fees", "How Wal-Mart Swiped JPMorgan in $16 Billion Debit-Card Battle", "Side-by-Side Comparison Chart Key Senate and House Bill Issues", "Press Release on Debit Card Interchange Fees and Routing; Proposed Rule", "New fees for banks likely to mean new fees from banks Timesonline.com: Local News", Board of Governors of the Federal Reserve System, "The New Federal Reserve Rule Will Enrich Banks for Not Preventing Fraud, Says the Merchants Payments Coalition", "New Bill Aims To Kill Durbin's Debit Card Fees", "Business groups ask Supreme Court to review swipe fee decision", "Court reverses ruling on swipe fees in favor of banks", "Judge rejects Fed's cap on debit-card fees as too easy on banks", "Durbin Chided by Judges Says Swipe-Fee Ruling Is Bank 'Giveaway'", "Supreme Court rejects challenge to debit card 'swipe fees' rules", https://en.wikipedia.org/w/index.php?title=Durbin_amendment&oldid=1108929081, This page was last edited on 7 September 2022, at 01:38. About 79.2 billion debit and prepaid card transactions amounting to $3.1 trillion were processed in the U.S. during 2019. Reloadable general-use prepaid cards: April 1, 2013, except that reloadable general-use prepaid cards sold prior to April 1, 2013, are not subject to the prohibition on network exclusivity unless and until they are reloaded, as follows: If sold and reloaded prior to April 1, 2013: May 1, 2013. 8. Opinions expressed by Forbes Contributors are their own. [18] Judge Leon held the Federal Reserve Board "clearly disregarded Congress' statutory intent by inappropriately inflating all debit-card transaction fees by billions of dollars." The final RULE is substantially similar to the proposed rule issued in 2021 and requires online (card not present) debit card transactions to be enabled for processing on at least two unaffiliated payment card networks. For this purpose, total assets are measured at the end of the calendar year preceding the date of the transaction.4 The Board will publish annually lists of institutions with consolidated assets of less than $10 billion and those with consolidated assets of $10 billion or more. The Durbin Amendment forced banks to add an unaffiliated payment network to their debit cards and imposed a cap on debit card interchange fees, which banks charge to process debit transactions. The Feds decision to revisit Reg II risks causing even further consumer harm, said groups said. For example, fees charged for checks, credit cards, or automated clearing house (ACH) transactions are not covered by section 920 or Regulation II. 11. For example, fees on cards used for electronic benefit transfer or reimbursement systems in connection with government food assistance programs are not subject to section 920 or Regulation II. For example, the National Credit Union Administration is responsible for enforcing the rule with respect to federally insured credit unions; the Office of the Comptroller of the Currency is responsible with respect to national banks and federal thrifts; the Federal Reserve Board is responsible with respect to state member banks; and the Federal Deposit Insurance Corporation is responsible with respect to state nonmember banks and state-chartered thrifts. There is limited competition to process online and other card-not-present debit transactions which in 2019 accounted for over $1 trillion in transaction value. The rule prohibits an issuer from receiving "net compensation" from a payment card network with respect to electronic debit transactions or debit card-related activities within a calendar year. The Durbin Amendment routing mandate was a huge hit to consumer protection and choice. Even worse were the significant financial costs consumers faced after the Durbin Amendment capped interchange fees and forced multiple payment networks onto debit cards, driving networks to lower their merchant rates to ensure the next transaction routes on their network. Non-reloadable general-use prepaid cards: April 1, 2013, except that non-reloadable general-use prepaid cards sold prior to April 1, 2013, are not subject to the prohibition on network exclusivity. 3. A small issuer that was exempt from the interchange fee standard in a particular calendar year but loses the exemption because its consolidated assets are $10 billion or more by the end of the year must comply with the interchange fee standard no later than July 1 of the next calendar year. The proposed revisions also clarifies that it is the responsibility of the debit card issuer to ensure at least two unaffiliated networks have in fact been enabled. Deep Dive: How Payment Card Networks Win Merchants Over - PYMNTS.com U.S. For example, fees charged by issuers to consumers or fees charged by networks to merchants where the network does not pay or credit that fee to an issuer are not covered by section 920 or Regulation II. The rule does not require an issuer to enable two unaffiliated payment card networks for each method of authentication. Preparing for Regulation II - CUInsight It has been almost a year and a half since the Fed had requested public comment on a "non-substantive" proposed amendment to Regulation II that would 1.) The Durbin Amendment is a law that was passed in 2010, as part of the Dodd-Frank Act. The Federal Trade Commission is responsible for enforcement with respect to other entities not covered by the above regulators. These days consumers have more ways to pay for transactions than ever before and new market entrants and technologiesmost notably blockchain and Buy Now Pay Later providershave the potential to completely disrupt the market. Synthetic identity fraud: Can your team recognize it? No. Press Release | Press Releases | Newsroom - Dick Durbin Ibge-bim - Bamb All rights reserved. A bank or merchant would have little incentive to enter into a co-brand agreement with a regulated Mastercard or Visa when they could pursue an unregulated agreement with Amex or Discover and return more to the customer. 2014 study from George Mason University reported that one million Americans lost their bank accounts after fees increased and free checking decreased.
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