Fed Rules Durbin Amendment is Fair

It looks like the Durbin amendment will stay in place.

The D.C. Circuit Court of Appeals has overturned district Judge Leon’s ruling that the Durbin Amendment, which set a cap for debit card swipe-fees at 21 cents plus 0.05% of transactions, didn’t go far enough.

The panel comprised of three judges upheld the amendment, striking a huge blow to retail groups including the likes of Target, Wal-Mart, and merchants in general.

This is good news for banks and card-issuers that have lost out on some $8 billion dollars in revenue. This has hit consumers, who have lost services such as free checking and rewards on debit cards due to banks and card-issuers cutting back on benefits.

There are compelling arguments for both sides.

Merchants and trade groups say that lower fees means greater savings for consumers, since the cut that card companies take would be passed down to their customers.

They argue that the Fed had accounted incremental costs, which were not covered under the Durbin Amendment, which amounted to a larger cap.

Card networks say that the growing risk of fraud and security breaches (as the massive Target breach indicates) necessitates greater protections and precautions.

There’s also the looming burden of converting standard magnetic-stripe payment cards to EMV and the burden and costs of doing such will be substantial.