What is the Durbin Amendment

The Durbin Amendment is named after its author, Illinois Senator Dick Durbin. Durbin crafted the amendment that eventually was incorporated into the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. After a lengthy stay in Congress, the Amendment was finally passed and was put into effect on October 1, 2011.

The Durbin Amendment takes aim at banking and credit card lenders who charge excessively high fees for credit card transactions. It’s estimated that before the Durbin Amendment was put into effect, retailers paid upwards of 44 cents for every successful credit or debit card transactions. This amendment reduces the amount that a lender can charge by almost 50 percent.

This reduction in fees means changes for almost everyone involved. For consumers, it may encourage them to use their credit cards more often. This can lead to higher consumer debt which only benefits the banks and the credit card companies. By using credit cards less it reduces the overall fees that are charged, keeping prices and fees to a minimum.

Retailers, even though they are now being charged less in credit card transaction fees, may have other charges through their banks increased. Their service fees may increase as well as the charges they pay for other bank services. In some cases, the retailers may not pass savings onto the customer to compensate for other increases that may be put into place.

For banks and credit card companies, they are scrambling to find ways to recoup their losses. Many are turning fees back onto customers and retailers. By increasing fees for services that retailers and consumers use, they can regain their losses quite fast. Some banks are eliminating many of the perks they offer their customers. Free checking has been one of the first things to go. Many banks have imposed higher charges on checking accounts that fall under a certain amount.

It has been the hope of those who supported the Durbin Amendment, that by changing the amount of fees that were charged, would somehow reflect on the amount the customers were asked to pay.

It will take some time to determine what the actual affects of the Durbin Amendment will be. By monitoring the prices retailers’ charge, customer’s spending habits and their method of payment and the fee schedules set out by credit card companies, analysts will be able to understand exactly how efficient the Durbin Amendment was in achieving its goals.