Home > Credit Cards > Debit Card Swipe Fee, We Hardly Knew Thee

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Just weeks after a law that limits debit card swipe fees fully took effect, a bipartisan effort in Congress is moving to repeal it. Representatives Bill Owens (D-N.Y.) and Jason Chaffetz (R-Utah) announced Wednesday that they are introducing a bill to overturn the Durbin Amendment, which has become the center of an ongoing controversy over rising bank fees.

“The Durbin Amendment is an affront to consumers and the banking industry,” Chaffetz said in a press release. “These legislatively enacted price controls have compelled banks to charge consumers higher (and in some cases new) fees to make up for lost revenue.”

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The amendment, passed last summer as part of the Dodd-Frank financial reform act, limits debit card swipe fees to be “reasonable and proportional to the actual cost” of processing each debit card transaction. The average cost of each swipe had risen to 44 cents, according to the Federal Reserve, which wrote rules under the new law capping the fees at about 22 cents per swipe.

In response, banks said they would have to increase other fees to make up for the lost revenue. Bank of America blamed its decision to start charging its customers $5 a month to use their debit cards for purchases partly on the revenue it lost due to Durbin.

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“This unprecedented transfer in costs from retailers to consumers—the result of government price fixing—has resulted in consumers paying higher fees for basic bank services,” Kenneth Clayton, chief counsel for the American Bankers Association, said in a statement supporting the new repeal attempt.

The law’s defenders counter that increasing fees have more to do with banks’ greed than the Durbin amendment.

“After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers,” said the law’s author, Sen. Dick Durbin (D – Ill.).

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  • https://www.unibulmerchantservices.com G. S.

    BofA’s $5 fee and all of the other new debit fees banks are beginning to charge are in response to the fall in revenues from debit card transactions that are the consequence of the passing of the Durbin Amendment and the subsequent Federal Reserve ruling to limit debit interchange at $0.22 + 0.05% of the transaction amount.

    Those of us who were paying attention to what was happening knew that this was coming and warned against it. Here is one of the things we wrote at the time: http://blog.unibulmerchantservices.com/banks-may-limit-debit-card-transaction-size-to-fight-fee-limit

    What happened was that the government decided that a substantial portion of the banks’ revenues would be collected by retailers. The banks then decided to make up for the shortfall by creating new revenue sources. Is that surprising?

  • http://blog.wexlerwallace.com Jay

    The Durbin Amendment was expected to increase savings in US households, but it seems to be hurting the consumer more than helping them. The Wexler Wallace law firm blog wrote a commentary about swipe fees. Check out the post: http://blog.wexlerwallace.com/?p=1186

  • Torganini

    To G.S.: It’s not a matter of whether or not it is ‘surprising;’ it comes down to exactly what Durbin said: “After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers,”

    In other words, the banks have been RAPING the consumers for YEARS already, by CAUSING HIGHER PRICES by charging merchants EXCESSIVE SWIPE FEES! This has been a MAJOR PROBLEM for MANY years – what do you NOT understand about that?

    Bottom line: The banks have been getting revenue that THEY NEVER *SHOULD HAVE BEEN GETTING* in the first place!

    I hate government meddling as much as the next person, but there is nothing “FAIR-MARKET” about THIS ON-GOING RAPING OF CONSUMERS AND MERCHANTS that happened before the Durbin Amendment. And no, I don’t necessarily agree with all the aspects of HOW this law was enacted; nor with every facet of the related law and amendment, but it is allegedly well-intentioned. I mean, for heaven’s sake, you have WAL-MART to blame more than anyone! They were the linch-pin/king-pin pushing the hardest for this whole thing – they complained long and hard about unfair swipe fees, and they paid their lobbyists and politicians to rectify the situation.

    And what part of the BANKS AND MORTGAGE INDUSTRY RAPING OF CONSUMERS for *MANY YEARS* do you FAIL to understand? Banks/Mortgage companies got BAIL-OUTS, and all while they were over-charging with these exorbitant swipe fees!

    COO: “Hey, Mr. Citigroup CEO, let’s RAPE the consumer some more! We just got $12 billion in a bail-out, what say we give $4 billion of that to our lead lenders?”

    CEO: “You know, Mr. COO, that’s an outstanding idea! I mean… we really DO need to RETAIN these same guys that CAUSED US TO GO UNDER, now don’t we? Aren’t we just the geniuses?! Besides, we’ll NEVER HAVE TO PAY IT BACK! We can just declare full-out bankruptcy and those [lead lenders] can magically [decide] to go elsewhere, even though we used that $4 billion and paid bonuses to them with that money!”

    Get a clue!

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