Durbin Amendment (Reg II)

What Durbin Means for You

Ordained as a benefit to merchants, the Durbin-driven debit changes under Reg II produce as much opportunity as they do risk, here are some questions to consider and to help you navigate smartly:

What is the impact of the Durbin Amendment for merchants?

Reg II establishes a three-part formula for calculating debit interchange fees (debit transaction implies signature and PIN debit and the inclusion of prepaid cards)

1.       Regulated (nonexempt): A card issuing bank is considered nonexempt from the regulated debit interchange rates when its assets exceed $10 billion.  Under the law, the maximum interchange fee an issuer may receive for an electronic debit transaction is $0.21 per transaction plus 5 basis points.

2.       Regulated with Fraud: An additional $0.01 adjustment towards the issuer’s debit card interchange fee if the issuer develops and implements policies and procedures designed to achieve the fraud-prevention standards.  Debit with fraud adjustment will be $0.22 per transaction plus 5 basis points

3.       Non-regulated (exempt): A card issuing bank with assets less than $10 billion is exempt from these limits and as such, prevailing rates apply.

Where will I see the savings?

Savings coming at the transaction level should be passed directly from your processor to you.  Those savings should also show clearly in your reporting and analytics. At this point in time, the greatest potential for debit card transaction savings will come from transactions involving cards that are issued by the country’s largest banks.   These typically represent anywhere from 70% to 80% of all debit card transactions. Merchants with higher average ticket prices will realize greater savings and merchants with lower average ticket prices will realize smaller savings, if any, and may actually be burdened with higher acceptance costs.

How do I know I am seeing savings?

It is imperative that you know from your provider that you are being charged new debit card rates as they apply to your business.  Generally speaking, and specifically as card economics evolve, we encourage merchants to move away from discount pricing models and to pass-through models, which are most likely to provide clear and discernible transaction reporting.

Is there anything else I should know?

The Durbin Amendment also allows merchants to set credit card minimums at $10 and allows merchants to offer discounts for different types of payments. 

Litle’s Response to Durbin

Litle passes 100% of interchange savings back to merchants and we are here to help you navigate the changes that come with the Durbin Amendment and under Reg II.   For additional information on how you can save more from Durbin read our eBook:

 Durbin & Debit- The Devil’s in the Details.