{
  "id": "R41913",
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      "id": 461254,
      "date": "2017-05-16",
      "retrieved": "2018-05-10T13:26:54.294508",
      "title": "Regulation of Debit Interchange Fees",
      "summary": "The United States has seen continued growth of electronic card payments (and a simultaneous decrease in check payments). From 2009 through 2012, debit card transactions have outpaced other payment forms. When a consumer uses a debit card in a transaction, the merchant pays a \u201cswipe\u201d fee, which is also known as the interchange fee. The interchange fee is paid to the card-issuing bank (i.e., the consumer\u2019s bank that issued the debit card) as compensation for facilitating the transaction. Section 1075 of the Consumer Financial Protection Act of 2010 (or Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203), 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.\nThe Federal Reserve may consider the authorization, clearance, and settlement costs of each transaction when it sets the interchange fee. The Durbin Amendment allows the interchange fee to be adjusted for costs incurred by debit card issuers to prevent fraud. Debit card issuers with less than $10 billion in assets are exempt by statute from the regulation, which means that smaller financial institutions may receive a larger interchange fee than larger issuers. The legislation also prohibits network providers (e.g., Visa and MasterCard) and debit card issuers from imposing restrictions that would override a merchant\u2019s choice of the network provider through which to route transactions.\nOn June 29, 2011, the Federal Reserve issued a final rule implementing the Durbin Amendment by Regulation II, which includes a cap of 21 cents plus 0.05% of the transaction (and an additional 1 cent to account for fraud protection costs) on the interchange fee for large issuers. The rule went into effect on October 1, 2011. Merchants expected to benefit from the Durbin Amendment by having to pay a lower swipe fee. Large debit card issuers expected to lose revenue under the regulated cap. Many small debit card issuers that were exempt from the rule had also opposed the Durbin Amendment given concerns about the feasibility of a sustainable two-tiered interchange pricing system. Since implementation of the rule, merchants have seen a limited and unequal impact on the amount they pay in swipe fees. Likewise, the impact of Regulation II has been uneven for covered institutions. Institutions not covered by the Regulation II have reportedly observed minimal change in revenues generated by debit transactions.\nH.R. 10, the Financial CHOICE Act of 2017, would repeal the Durbin Amendment. Specifically, Section 735 of the Financial CHOICE Act would repeal Section 1075 of the Consumer Financial Protection Act of 2010. On May 4, 2017, H.R. 10 was ordered to be reported by the House Financial Services Committee.",
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      "source": "EveryCRSReport.com",
      "id": 456813,
      "date": "2016-11-01",
      "retrieved": "2016-11-28T21:13:31.061434",
      "title": "Regulation of Debit Interchange Fees",
      "summary": "The United States has seen continued growth of electronic card payments (and a simultaneous decrease in check payments). From 2009 through 2012, debit card transactions have outpaced other payment forms. When a consumer uses a debit card in a transaction, the merchant pays a \u201cswipe\u201d fee, which is also known as the interchange fee. The interchange fee is paid to the card-issuing bank (i.e., the consumer\u2019s bank that issued the debit card) as compensation for facilitating the transaction. Section 1075 of the Consumer Financial Protection Act of 2010 (or Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203), 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.\nThe Federal Reserve may consider the authorization, clearance, and settlement costs of each transaction when it sets the interchange fee. The Durbin Amendment allows the interchange fee to be adjusted for costs incurred by debit card issuers to prevent fraud. Debit card issuers with less than $10 billion in assets are exempt by statute from the regulation, which means that smaller financial institutions may receive a larger interchange fee than larger issuers. The legislation also prohibits network providers (e.g., Visa and MasterCard) and debit card issuers from imposing restrictions that would override a merchant\u2019s choice of the network provider through which to route transactions.\nOn June 29, 2011, the Federal Reserve issued a final rule implementing the Durbin Amendment by Regulation II, which includes a cap of 21 cents plus 0.05% of the transaction (and an additional 1 cent to account for fraud protection costs) on the interchange fee for large issuers. The rule went into effect on October 1, 2011. Merchants expected to benefit from the Durbin Amendment by having to pay a lower swipe fee. Large debit card issuers expected to lose revenue under the regulated cap. Many small debit card issuers that were exempt from the rule had also opposed the Durbin Amendment given concerns about the feasibility of a sustainable two-tiered interchange pricing system. Since implementation of the rule, merchants have seen a limited and unequal impact on the amount they pay in swipe fees. Likewise, the impact of Regulation II has been uneven for covered institutions. Institutions not covered by the Regulation II have reportedly observed minimal change in revenues generated by debit transactions.\nH.R. 5983, the Financial CHOICE Act of 2016, would repeal the Durbin Amendment. Specifically, Section 335 of the Financial CHOICE Act would repeal Section 1075 of the Consumer Financial Protection Act of 2010. On September 13, 2016, H.R. 5983 was ordered to be reported by the House Financial Services Committee.",
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    {
      "source": "EveryCRSReport.com",
      "id": 455797,
      "date": "2016-09-14",
      "retrieved": "2016-09-16T18:02:46.187471",
      "title": "Regulation of Debit Interchange Fees",
      "summary": "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 \u201cswipe\u201d fee, which is also known as the interchange fee. The interchange fee is paid to the card-issuing bank (the consumer\u2019s bank that issued the debit card), and the fee covers the bank\u2019s costs to facilitate the transaction. Section 1075 of the Dodd Frank Act (15 U.S.C. 920), 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.\nThe Federal Reserve may consider the authorization, clearance, and settlement costs of each transaction when it sets the interchange fee. The Durbin Amendment allows the interchange fee to be adjusted for costs incurred by debit card issuers to prevent fraud, but the Federal Reserve is prohibited from considering other costs associated with the transaction. Debit card issuers with less than $10 billion in assets would be exempt from the regulation, which means that smaller financial institutions may receive a larger interchange fee than larger issuers. The legislation also prohibits network providers (e.g., Visa and MasterCard) and debit card issuers from imposing restrictions that would override a merchant\u2019s choice of the network provider through which to route transactions.\nOn June 29, 2011, the Federal Reserve issued a final rule to implement the Durbin Amendment, which includes a cap on the interchange fee for large issuers. The rule went into effect on October 1, 2011. Merchants that currently pay fees above the regulated interchange fee would likely benefit from the Durbin Amendment; large debit card issuers that would lose revenue under the regulated cap would be opposed. Many small debit card issuers that are exempt from the rule, however, are also opposed to the Durbin Amendment given concerns that a two-tiered interchange pricing system may not be sustainable over time. On September 9, 2016, legislation was introduced in the 114th Congress, H.R. 5983, the Financial CHOICE Act of 2016, which would repeal the Durbin Amendment. Specifically, Section 335 of the Financial CHOICE Act would repeal Section 1075 of the Consumer Financial Protection Act of 2010. On September 13, 2016, H.R. 5983 was ordered to be reported by the House Financial Services Committee.\nThis 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.",
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    {
      "source": "EveryCRSReport.com",
      "id": 389322,
      "date": "2011-07-12",
      "retrieved": "2016-04-07T00:43:20.576641",
      "title": "Regulation of Debit Interchange Fees",
      "summary": "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 \u201cswipe\u201d fee, which is also known as the interchange fee. The interchange fee is paid to the card-issuing bank (the consumer\u2019s bank that issued the debit card), and the fee covers the bank\u2019s 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.\nThe Federal Reserve may consider the authorization, clearance, and settlement costs of each transaction when it sets the interchange fee. The Durbin Amendment allows the interchange fee to be adjusted for costs incurred by debit card issuers to prevent fraud, but the Federal Reserve is prohibited from considering other costs associated with the transaction. Debit card issuers with less than $10 billion in assets would be exempt from the regulation, which means that smaller financial institutions may receive a larger interchange fee than larger issuers. The legislation also prohibits network providers (e.g., Visa and MasterCard) and debit card issuers from imposing restrictions that would override a merchant\u2019s choice of the network provider through which to route transactions.\nOn June 29, 2011, the Federal Reserve issued a final rule to implement the Durbin Amendment, which includes a cap on the interchange fee for large issuers. The rule is scheduled to go into effect on October 1, 2011. Merchants that currently pay fees above the regulated interchange fee would likely benefit from the Durbin Amendment; large debit card issuers that would lose revenue under the regulated cap would be opposed. Many small debit card issuers that are exempt from the rule, however, are also opposed to the Durbin Amendment given concerns that a two-tiered interchange pricing system may not be sustainable over time. Legislation proposed in the 112th Congress, S. 575, the Debit Interchange Fee Study Act of 2011 (Senator Jon Tester), and H.R. 1081, the Consumers Payment System Protection Act (Representative Shelley Moore Capito), would delay implementation of the Durbin Amendment and require a study of the impact of this legislation on small issuers. On June 8, 2011, S.Amdt. 392 (Senator Jon Tester) to S. 782 was considered, but not agreed to, in the Senate by a 54-45 vote. This amendment would also have delayed implementation of the Durbin Amendment and required a study.\nThis 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.",
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  "topics": [
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