Regulation II (Debit Interchange)

The Impacts of the Proposed Rule

What It Is

When the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010, the “Durbin Amendment” required the Federal Reserve Board to establish standards for assessing whether debit interchange fees are “reasonable and proportional” to the cost incurred by the issuer with respect to the debit card transaction.

Why It Matters

In ensuing years, there has been substantial scholarship – including research from Board economists involved with the proposed rule – demonstrating the Durbin Amendment, or Regulation II, resulted in banks “decreasing the availability of free accounts, raising monthly fees, and increasing minimum balance requirements.” Even small issuers exempt from Regulation II were shown to have raised prices, as a competitive response.

What We Believe

Studies repeatedly show that after Regulation II was enacted in 2011, merchants reneged on their promise to consumers and did not lower the prices of consumer goods.
Banks rely on debit interchange revenue to enhance the technologies used to ensure consumers can use their debit cards to make purchases across the world, protect consumers against fraud, and to expand other bank offerings, such as free or low-cost bank services to their customers.
Merchants derive significant benefits from accepting debit cards, such as no longer having to handle cash, which can cost as much as 15 percent of their sales, or to worry about checks clearing, as well as meaningful commercial benefits such as engaging more consumers, making more sales, improving the overall consumer experience and making higher-cost sales.


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