What the Durbin Amendment did to what you pay on debit

The Durbin Amendment is the section of the 2010 Dodd-Frank Act that capped what large banks can charge merchants for debit transactions and required every debit card to work on more than one network. The Federal Reserve implemented it as Regulation II, and the cap for covered issuers is twenty-one cents plus five hundredths of a percent of the transaction, with an additional penny available to issuers meeting fraud-prevention standards.

Those are the three numbers that matter, and they have been stable long enough to plan around.

Which banks are actually covered by the cap?

Issuers with ten billion dollars or more in assets. Everyone smaller is exempt, and exempt-issuer debit interchange is materially higher. That single threshold explains most of the variation an owner sees between two debit sales of identical size.

You cannot identify a covered card at the counter, and there is no legitimate way to accept one and refuse the other. The practical consequence is that your blended debit cost is a function of which banks your neighborhood uses — a fact about your customers, not about your negotiation.

What did the rule do besides cap a fee?

It created routing choice. Regulation II requires at least two unaffiliated networks on every debit card and forbids issuers and networks from blocking a merchant's ability to route across them. That provision has aged into the more valuable half of the rule, because a cap only helps on covered cards while routing choice applies to all of them.

The Fed later confirmed that the same requirement covers card-not-present debit, closing a gap that had let online and phone debit sit effectively single-routed for years. The rulemaking record lives on the Federal Reserve site.

Did small merchants get the savings?

Unevenly, and it is worth being honest about that. The cap lowered interchange on covered debit, but interchange is only one layer of what you pay. Processor markup sits on top of it, and a markup that grows as interchange falls hands the saving to somebody else.

This is the practical lesson rather than a political one: a rule that lowers a wholesale cost only reaches you if your pricing model passes wholesale costs through. On interchange-plus pricing, the cap shows up in your statement. On a flat blended rate, it may not show up at all, because the rate was set before the cap and never moved.

What should a store owner actually do with this?

Check whether you can see interchange separately on your statement. If you can, the cap is working for you on covered cards and you can verify it. If you cannot, that is the finding — not that you are being cheated, but that your pricing model hides the one number this rule was written to lower.

Then ask about routing, because that half of the rule needs no pricing model to help you and costs nothing to ask about.

One more thing is worth setting straight, because salespeople blur it. The Durbin Amendment did not lower what you pay. It lowered what a covered issuer may charge for its part of the transaction. Whether that reduction reaches your bank account depends entirely on the contract between you and your processor, and that contract was not written by Congress.