Regulation of Debit Interchange Fees [July 12, 2011]   [open pdf - 211KB]

"Although the United States has seen continued growth of noncash or electronic payments, debit card transactions outpaced credit card transactions and other forms of payments in 2009. When a consumer uses a debit card in a transaction, the merchant pays a 'swipe' fee, which is also known as the interchange fee. The interchange fee is paid to the card-issuing bank (the consumer's bank that issued the debit card), and the fee covers the bank's costs to facilitate the transaction. Section 920 of the Dodd Frank Act, also known as the Durbin Amendment, authorizes the Federal Reserve Board to prescribe regulations to ensure that the amount of any interchange transaction fee received by a debit card issuer is reasonable and proportional to the cost incurred by the issuer. […] This report begins with a description of the debit payments process and network pricing. Possible effects of the Durbin Amendment on the banking system are then discussed in light of comments by Federal Reserve Board Chairman Ben Bernanke. Given that banks have increasingly relied upon non-interest or fee income during the past two decades, the decline in overall bank operating income may be material; smaller banks may be disproportionately affected because a large share of their fee income is generated through checking and savings deposits-related services. Technological developments by network providers, however, could reduce the revenues generated from this line of business for large and small banks even in the absence of the Durbin Amendment."

Report Number:
CRS Report for Congress, R41913
Public Domain
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