On 1 October 2011, the Federal Reserve's Regulation II - implementing Section 1075 of the Dodd-Frank Act, commonly known as the Durbin Amendment - took effect. The regulation capped debit card interchange fees charged by large issuers (those with assets over USD 10 billion) at 21 cents plus 0.05% of the transaction value, with an additional 1 cent fraud prevention adjustment.
What Changed
Before Regulation II, debit interchange fees in the US averaged approximately 44 cents per transaction. The new cap of roughly 21-24 cents per transaction represented a reduction of more than 40%. The regulation applied only to debit card transactions and only to issuers above the USD 10 billion asset threshold, exempting smaller banks and credit unions.
Network Routing Requirements
Beyond the interchange cap, the Durbin Amendment included a provision that would prove equally consequential: it required that every debit card carry at least two unaffiliated payment network options. This meant Visa-branded debit cards needed to also carry a PIN network like STAR, NYCE, or Pulse, and merchants had to be able to route transactions over whichever network they preferred.
This routing requirement gave merchants leverage to direct transactions to lower-cost networks, intensifying competition in the US debit processing market.
Industry Impact
The interchange reduction transferred approximately USD 6-8 billion annually from card issuers to merchants. Large retailers generally supported the regulation, while large issuers argued it reduced their ability to fund debit card programmes, fraud prevention, and rewards.
Lasting Significance
The Durbin Amendment became one of the most debated pieces of payment regulation in US history. It was repeatedly challenged in court, with issuers and networks arguing the cap was set too low and the routing requirements were overly prescriptive. In 2023, the Federal Reserve proposed lowering the cap further, and in 2025, a federal court vacated portions of the proposed reduction - illustrating the ongoing legal and political contention around regulated interchange.
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