Federal Reserve: Debit card swipe fees falling thanks to Durbin amendment

Fees charged by banks for use of their debit cards have been roughly halved since new price caps were put in place, according to data collected by the Federal Reserve.

The central bank found that, six months after the highly contentious limits on "swipe fees" were established, banks subject to the cap saw their average fees drop by 45 percent.


Before the limit was established, the average fee was 43 cents per transaction. Six months after the cap was put in place, it had fallen to 24 cents.

The data marks fresh fodder for the fight over the so-called "Durbin amendment," which proved to be one of the more bruising battles on Capitol Hill last year.

Sen. Dick DurbinRichard (Dick) Joseph DurbinThe Hill's Morning Report - Sponsored by Goldman Sachs - Pelosi, Mnuchin push stimulus talks forward, McConnell applies brakes Schumer says he had 'serious talk' with Feinstein, declines to comment on Judiciary role Durbin signals he isn't interested in chairing Judiciary Committee MORE (D-Ill.) pushed the provision, a late entry in the Dodd-Frank financial reform law, to set a limit on the fees a bank could charge a business for swiping its debit card. The measure pitted retailers against financial institutions in a high-stakes lobbying fight with billions of dollars at stake. 

Banks came up short in their effort to delay the limit but gained ground when the Fed finalized the cap at a level roughly twice as much as the original proposal.

Nonetheless, banks have repeatedly warned the rule will require them to roll back perks while imposing new fees to make up for the lost revenue. Bank of America blamed the amendment in its failed attempt to impose a $5 monthly fee for debit cards.

With the new report, both sides were eager to jump back into the fray Tuesday.

A key piece of the Durbin amendment was an exemption for smaller banks with less than $10 billion in assets. Backers of the proposal said it ensured community banks would not be dinged by the cap, while the financial industry dismissed it as unworkable.

On Tuesday, the retail industry highlighted the Fed's finding that the average fee charged by exempted institutions had held steady with the cap in place, at 43 cents.

"Small banks have been completely unaffected by the changes," said Brian Dodge, senior vice president for communications for the Retail Industry Leaders Association.

However, the banking industry said that time will tell on the rule, warning that market forces will eventually make the rule a bad deal for not only small banks, but consumers as well.

"The Durbin Amendment’s primary beneficiaries continue to be big-box retailers who want to reap the benefits of our nation's payments system without paying for it or passing along their savings to customers as promised," said Frank Keating, president of the American Bankers Association (ABA). “ABA firmly believes the Durbin Amendment’s small-bank exemption can’t work long-term."

Bill Cheney, president and CEO of the Credit Union National Association, warned that the "jury is still out."

"Credit unions continue to  be concerned that market forces will ultimately drive down the fees that the exemption for smaller institutions is intended to protect," he said.