The Durbin Amendment, named after Senator Richard J. Durbin (D- Ill.), capped interchange or swipe fees, the amount a bank can charge a bank to process a debit transaction, at 21 cents, half of the original maximum. Alford said that the banking industry has responded by eliminating discounts, a blow to small businesses.
“With the normal margins greatly shrinking, the discounts that card companies would share with their retailers have now disappeared,” Alford said, The Madison Times reports.
Alford cited Beth Robertson, the director of payment research for Javelin Strategy & Research Group, who said that small retailers who specialize in low-cost goods – like coffee shops – are suffering as a result.
“Under the new fee structure, retailers pay 22 cents for each $8 transaction. Prior to the swipe fee limits, a purchase like that would have cost them 14 cents,” Robertson said, according to The Madison Times.
Alford said that large retail stores are the businesses benefiting from the swipe fee cap. Big retailers, Alford said, only pay 72 cents for a $1,000 transaction that would have cost them $15.02 before the interchange fee cap.
As a result of the Durbin Amendment, many smaller retailers have responded by eliminating debit transactions and placing “cash only” signs at their registers. Banks have responded to revenue losses resulting from the Durbin Amendment by instituting new fees on debit card users.
Alford said that the Durbin Amendment threatens the common man’s ability to make responsible financial decisions.
“The emergence of the debit-card…gets our new consumers into the banking system and teaches them how to budget and manage their precious cash resources,” Alford said, according to The Madison Times. “This Durbin Amendment puts it under attack and threatens the financial future of millions of up and coming consumers and entrepreneurs.”
Alford called on consumers to take action and inform Congress that the Durbin Amendment is a damaging hit on the U.S. economy.
“We need good policy. Bad policy should be quickly removed…In God’s name, REPEAL THE DURBIN AMENDMENT!!” Alford wrote The Madison Times reports.