According to last week’s report from the Federal Trade Commission (FTC), consumers haven’t really benefitted from the Durbin Amendment, part of the 2010 Dodd-Frank Act.
The amendment prevents large financial institutions from charging high interchange fees (also called swipe fees) for debit card transactions, but some 14,000 small banks and credit unions are exempt and have actually raised their fees.
Meanwhile, some large banks are making up for lower interchange fees by implementing new fees on checking accounts. And two of the biggest issuers of credit cards, MasterCard and Visa, were not subject to the reform and can still charge their own swipe fees. The rule only applies to banks and credit card issuers with more than $10 billion in assets.
Federal Reserve Board data released last May showed swipe fees paid to those exempt banks were an average of 43 cents per transaction. That’s despite the Federal Reserve ruling that said debit card swipe fees should drop from an average of 42 cents to 12 cents following the implementation of the Durbin Amendment. Following that ruling, larger banks pressured the Federal Reserve to set the fees at 21 cents plus .05% of each transaction and one cent going toward fraud prevention.
Is reform helping consumers?
Although the legislation was enacted with to help consumers, there’s little evidence that it has done so. The FTC report does say that the legislation has created a more competitive market for payment processors. “Now that merchants have new choices for routing to lower cost processors, it appears that payment card networks and other processors have begun to compete for merchant business by offering a range of interchange rates.“