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The Green Sheet Online Edition

January 23, 2012 • Issue 12:01:02


Does Durbin open the door for merchant surcharging?

"Can retailers charge consumers for interchange fees now? Was it because of the Durbin Act? Thank you for your help."

David Mierkey
Intelijen Group


It is our understanding that it is not allowed for merchants to charge consumers for interchange fees. However, we decided to refer your question to an industry expert who could provide you an in-depth answer. Mark Brady, Director of Compliance at Compliance Solutions and Resources, offered the following comments:

    If this question asks if merchants may surcharge a cardholder for a POS transaction, the short answer is no. But let's see what "Durbin" does say about card processing and POS transactions. First, here is some background to Section 1075, which contains the Durbin Amendment. This is just one section in the financial services overhaul law called the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    In brief, Sen. Richard Durbin, D-Ill., offered an amendment to the Senate version of the financial regulatory overhaul bill. His amendment received bipartisan support from the Senate, and was later modified and included in the final Wall Street Reform Act that President Obama signed into law on July 21, 2010.

    The Federal Reserve Board has sole authority to write the implementing regulations mandated in Section 1075 of the Wall Street Reform Act, which include the following:

    1. Regulations to establish the debit interchange fee parameters

    2. Regulations on fraud standards included in debit interchange rates

    3. Regulations on network fees

    4. Regulations that prohibit exclusive network arrangements for debit

    5. Regulations that allow merchants to route payment transactions

    Although the card brands continue to prohibit surcharging, the Durbin Amendment does impose certain limits.

    It limits card brand restrictions on setting transaction minimums or maximums on credit cards. All merchants will be allowed to set a minimum transaction amount for the acceptance of credit (not debit) cards provided:

    • The value does not exceed $10 (The Federal Reserve Board can increase the amount), and; the value does not differentiate between issuers or card networks

    • Any federal agency or institution of higher education will be allowed to set a maximum transaction amount on the acceptance of credit cards provided the value does not differentiate between issuers or card networks

    It limits card brand restrictions on offering discounts for use of a form of payment. A payment card network may not inhibit the ability of a merchant to provide a discount or incentive for payment by the use of cash, check, debit card, or credit card provided:

    • The discount or incentive does not differentiate on the basis of the issuer or payment card network, and is offered to all buyers, and disclosed clearly.

    So while Durbin does not address surcharging, it does give merchants some relief in declining to accept credit card transactions not exceeding $10.

We wish to thank Mark Brady for this explanation of how new regulations under the Durbin Amendment affect merchants and consumers at the POS.


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