Wednesday, March 30, 2011
The Durbin Amendment, among other things, instructs the Fed to issue rules to cap debit card interchange fees charged merchants at rates deemed "reasonable and proportional" to costs incurred by issuers. Community banks – those with assets below $10 billion – are exempt from the legislation. So are prepaid debit cards.
A set of proposals for implementing Durbin was drafted by the Fed's staff and released for public comment in late December; interested parties had until February 22 to submit comment letters. They proposed two scenarios for capping debit card interchange, either of which would result in a 70 percent hit to issuing banks' debit interchange revenues, based on 2010 assessments.
Opponents argue the proposal could have serious unintended consequences for consumer spending and bank balance sheets. It also could stymie efforts to bank the unbanked by forcing banks to raise other fees, thereby making checking accounts unaffordable to more Americans, several economists have warned.
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