Durbin amendment summary and its side effects
Durbin amendment was implemented last year and many hues and cries were raised by banks as its implementation would lead to a significant loss of revenues for banks. But till date, no bank has posted a huge loss in revenue.
Durbin amendment Summary: What exactly is was?
There is a fees charged by banks whenever you swipe your debit card. Durbin amendment has decreased this fee to over 70%. This is Durbin amendment summary. Now, when Durbin amendment was to be implemented, all banks told that it would lead to significant loss of revenues and would make things more bad for them in already tough economic conditions but National retail federation hailed this legislation as it was supposed to be a big win for small business and retailers are they would be able to save more. But now, the power to set interchange exchange fees on debit cards has been transferred to Federal Reserve (it was earlier with card associations) and this led to emergence of many doubts and unintended consequences. Though it should be noted that banks which were having assets worth $10 billion or more are affected by Durbin amendment and smaller banks can continue to charge same interchange rates which they were charging earlier.
As per Bankers Community, all banks have increased their account fees in order to compensate for the loss of revenue after Durbin amendment’s implementation. Things have become difficult in these tough times when unemployment levels are at a high and food bills are increasing with every month. The increased banking fees have just added fuel to fire. The worst part is that, both merchants as well as consumers have been affected with this increase in banking fees.
As banks feared a potential loss of around 70% after Durbin amendment implementation, so they started looking for other ways to compensate for the revenue loss caused by Durbin amendment. Now for this they have started closing high risk accounts (after analyzing their credit scores) and have also raised minimum qualification standards for opening new debit accounts. Also, when you open new account, the free checking feature has been also withdrawn in addition to increase in minimum balance.
After witnessing these effects of Durbin amendment, no one wanted it to be implemented. No doubt, merchants wanted to pay less price but not at the cost of losing their customers. To conclude Durbin amendment summary, it can easily end up as side-effect of medicine which was prescribed as a remedy for a problem.
