Durbin amendment was proposed by Sen. Richard Durbin is an addendum to the Dodd-Frank Wall Street Reform and consumer protection act of 2010 focuses on placing a cap on debit card interchange rates and other reforms in the payment card industry. The amendment is rather complex, but the main objective was to lower acceptance costs for merchants and to provide more competition among networks.According to the Durbin amendment The average fee of 44 cents per debit card transaction charged from merchants by the card brands was considered excessive by supporters of the legislation. After so much debate and opposition Initial rules were released in December 2010 and final law goes into effect on October 1, 2011 which might cost banks roughly $9.4 billion annually.
To enforce this part of the law, the Durbin Amendment gave the Federal Reserve the power to regulate debit card interchange fees.
Interchange is a fee paid between banks for the acceptance of a card based transactions.Card issuers charge merchants an interchange fee every time a debit or credit card is used to make a purchase. The fee amount is determined by Visa and MasterCard. The Durbin Amendment imposes a cap on this fee. Until the Durbin law is imposed the average interchange fee was 44 cents per transaction. After the Durbin Amendment takes effect on October 1, 2011, the fee is capped at 21 cents, plus 0.05% and an additional discretionary 1 cent for institutions employing effective fraud prevention initiatives.