TERMS
__________________WHAT IS THE DURBIN AMENDMENT?
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BUNDLED VS.
INTERCHANGE PLUS
PRICING
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PROCESSING COST
FUNDAMENTALS
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WHITEPAPER
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OTHER FREQUENTLY ASKED QUESTIONS
WHAT IS THE DURBIN AMENDMENT?
Senator Dick Durbin introduced a bill into Congress as an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Durbin Amendment asked Congress to establish “reasonable fees and limits” to the amount of interchange charged by issuing banks for debit card transactions. The amendment also addressed network exclusivity — which is only routing debit transactions through one network. The amendment was signed into law by the President in July 2010. Since it was enacted, businesses accepting card-based payments could:
- Set a minimum transaction amount for credit cards
- Set a maximum transaction amount for credit cards at federal agencies and institutions of higher education
- Offer discounts for payment by cash, check, debit, credit or prepaid. Discounts must be universal and cannot be based on issuer or payment card network
The Federal Reserve Board had until June 2011 to set debit card interchange rates and finalize the remaining details of the ruling. In June 2011, the Federal Reserve announced the following:
- Debit interchange is set at 0.05% + $0.22. The $0.22 includes $0.01 per transaction for issuers with fraud prevention programs
- Issuers are required to enable two unaffiliated networks for electronic debit transaction authorization and processing. For instance, one network for PIN debit, one network for signature debit prior to April 2012
- Health benefit cards and certain prepaid cards are not included in the network routing and excluded until April 2013 due to challenges with technology
The Durbin Amendment applies to Discover, MasterCard and Visa and the PIN Debit Networks. The Durbin Amendment only amended pricing for debit transactions on debit cards issued by banks with over $10 billion assets.
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