As of October of 2011, the Durbin Amendment was passed into law. Learning the impacts of this groundbreaking economy reform can help your business anticipate new potential costs.
- Durbin Amendment Summary: The Dodd-Frank Financial Reform and Consumer Protection Act became law in 2010. This legislation was designed to limit major financial corporations from taking advantage of average consumers. The Durbin Amendment specifically targets “swipe fees” for debit cards. “Swipe fees” refer to a surcharge levied on businesses each time a debit card is used. Before the amendment, average swipe fees could reach up to 40 cents per transaction. The Durbin Amendment limits these fees significantly.
- For The Consumer: Consumer experience at the store will remain mostly unchanged. Durbin Amendment charge reductions take place on the merchant’s side of the transaction. However, lender reactions to the Durbin Amendment are likely to impact how credit cards are used. High swipe fees provided billions of dollars in bank revenue annually. Strict debit card restrictions, fresh fees, and elevated minimum balances have been instituted by lenders to compensate for these losses.
- For Your Business: Merchants are impacted directly by the new legislation. Debit card transaction fees will be reduced by over 50%. The Federal Reserve now restricts transaction fees to 21 cents and 0.05% of the total transaction. A 1 cent surcharge may be added in exchange for specific fraud-prevention services. Merchants are no longer limited to one debit network service. Retailers can price match the services of several debit networks to determine the lowest price. Merchants can also now offer customer incentives for use of a credit card or debit card. These types of sales incentives were previously banned by major credit companies.
Navigating the rigors of retail finance can be challenging. Limit your dependence on credit card companies for objective merchant services. Trust Merchant Advocate to negotiate the best transactions rates for your company. Dial our associates at (732) 727-2073 for more information.