It’s no laughing matter: the Durbin amendment to the Dodd-Frank Act set April 1, 2012 as the effective date for “the prohibition on network exclusivity as it applies to issuers.”
Translation: all debit cards issued in the United States must “participate” in at least two different debit networks. For example, debit cards designed to work with Visa’s Interlink network must also be equipped for access to at least one other non-Visa-affiliated debit network, such as STAR or PULSE.
Most experts agree that regulators intended for the new law to spur competition in the debit-processing arena, and help the smaller debit networks get into more consumer wallets by hopping a ride with Interlink and Maestro (MasterCard’s debit network). It appears, however, that that won’t happen; instead, the major networks have instituted new fees designed to incent even greater volumes on their own networks.
In Visa’s case, a new fixed acquirer network fee offers merchants an incentive to lump as many transactions as possible onto the same network, so as to spread that fixed fee across more transactions.
To further unpack the implications of yesterday’s rule triggers, we asked two familiar experts — Paul Hastings’ Tom Brown and MPD’s Margaret Weichert — to explain what the next phase of Durbin brings. We include the full audio of those conversations below.
