The Durbin Amendment and the Payments Value Chain – A Current Look

Executive Summary

The financial crisis of 2008-2009 produced a widespread call for changes in the financial regulatory system. As a result, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was signed into law on July 21, 2010. The Act represents a significant change in the American financial regulatory environment affecting all Federal financial regulatory agencies and affecting almost every aspect of the nation’s financial services industry. Section 1075 of this Act amends the Electronic Funds Transfer Act (EFTA) by adding Section 920, also known as the Durbin Amendment (“Durbin”), which encompasses the debit interchange transaction fees and rules for payment card transactions. The intent of Durbin was to transfer wealth from the Issuing banks to the merchants with the hope that it will result in lower prices for consumers through lower fees to merchants. This paper seeks to clarify issues and discuss the effects on the industry as a whole.

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