This month marks the not-so-happy fourteen-year anniversary of the Durbin Amendment, which created price controls on debit card interchange fees. Despite claims that it would lower costs, it’s hard to find regulations that have had a more harmful impact on consumers than that of the Federal Reserve’s rules implementing this law. The results are clear: instead of helping everyday Americans, the rule has made banking more expensive and less accessible.
Senator Dick Durbin (D-IL) proposed his amendment as a way to protect merchants from high “swipe fees”—the small charges that retailers pay to banks every time a customer uses a debit card. The Fed’s regulations, finalized in October 2011, capped the swipe fee for each individual transaction at 21 cents, plus 0.05%, depending on the size of the bank by which the card was issued. The idea was that, by capping those fees, merchants would save money and pass those savings on to consumers in the form of lower prices. But that never happened. A study by the Richmond Fed shows that most retailers chose not to change prices following the enactment of the Durbin Amendment, and prices have risen significantly over the past decade.
While retailers fared well, financial institutions, such as banks and credit unions, were hit hard and lost billions of dollars in revenues. However, as is almost always the case from government taxes, fees, and regulations, those added business costs (and lost revenue) were directly passed along to customers with bank accounts.
Before the Durbin Amendment, around 75% of checking accounts were free. Just two years later, that number had fallen below 40% and is almost non-existent today. To make up for lost interchange income, many banks raised monthly fees, added balance minimums, or eliminated rewards programs altogether. Low-income households—those the law was supposed to help—were disproportionately hurt. Some were forced out of the banking system or were subject to a fee-based checking account.
Even more troubling, the Durbin Amendment has slowed innovation. Interchange revenue helps fund fraud detection tools, cybersecurity investments, and technology upgrades that keep the payments network safe. With that revenue constrained, smaller institutions have less capacity to invest in the next generation of digital banking services. In an age when cybercrime is growing and consumer expectations are rising, that’s a dangerous trade-off.
Now, more than a decade later, policymakers should acknowledge that the Durbin Amendment has failed to deliver on its promises. It didn’t lower prices. It didn’t increase competition. Instead, it shifted costs from retailers to consumers, from large banks to small institutions, and took vital resources away from innovation.
Nevertheless, some members of Congress continue to believe these price controls should be extended to credit cards via the Credit Card Competition Act. This legislation is a poorly designed attempt to artificially increase market competition by requiring card-issuing banks to provide merchants with at least one credit card network to choose from other than Visa or Mastercard when processing credit card transactions. The authors believe that gifting market share to others will reduce credit card interchange fees, and that merchants will pass the resulting cost savings on to consumers.
With government-directed competition, what could go wrong?
It’s time for Congress to recognize price controls don’t work and repeal the Durbin Amendment entirely. Let’s make October 2025 the last time we have to commemorate this unfortunate occasion.