Durbin Debit

The Durbin Amendment

On Oct. 1, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act went into effect. The law, popularly known as the “Durbin Amendment,” mandated the Federal Reserve to develop and enforce new limits on the per-transaction fees banks charge for debit card use. The justification for the change was that debit card fees do not have to cover unpaid debt risk the way credit card fees do. The final Fed rule that went into effect in 2011 was set at 21¢ plus 5 basis point ad valorem, which included other costs such as hardware, software, network connectivity, labor, transactions monitoring, and fraud losses.


In July of 2013, U.S. District Judge Richard Leon agreed with merchants who claimed the Federal Reserve was not following the mandate of the Durbin Amendment. Specifically at issue was the Durbin requirement that the Fed consider only the costs associated with a debit transaction: authorization, clearing, and settlement (ACS). Judge Leon ruled that the Fed must rewrite the formula; the ruling was stayed pending an appeal brought by the Federal Reserve.

Court Of Appeals

In 2014 the D.C. Circuit Court of Appeals struck down the district court decision that ordered the Federal Reserve to rewrite the rules on per-transaction fees. The panel noted that “Congress put the Board, the district court and us in a real bind...given that the Durbin Amendment was crafted in conference committee at the eleventh hour, its language is confusing and its structure convoluted.”

Supreme Court rejects challenge

In January 2015, The U.S. Supreme Court declined to hear a challenge to the controversial debit card “swipe fee” rules, dealing a blow to the merchants who argued the charges were unfairly high.

Effect on Higher Education

On large debit card transactions like tuition payments, many schools have been reaping the benefits of the new regulated interchange and are saving significant money. On some smaller transactions the cost of processing a debit transaction has actually increased.