U.S. Sen. Dick Durbin, a Democrat from Illinois, announced on April 23 that he will retire after his current term ends in January 2027.
While he isn’t what you might call the Senate “finance guy” — he’s the top Democrat on the Senate Judiciary Committee, not the Banking Committee — Durbin has been impactful on a number of legislative financial actions over his decades of service.
In particular, he helped reshape debit card processing fees in a major way with the Durbin Amendment back in 2010. More recently, he’s been working to shake up the credit card interchange landscape as a sponsor of the Credit Card Competition Act.
While he’s positioned his efforts as pro-consumer, the results — or anticipated results — of his efforts haven’t always handed consumers a win.
What did the Durbin Amendment do?
The eponymous Durbin Amendment (part of the Dodd-Frank Wall Street Reform and Consumer Protection Act) greatly reduced the debit card processing fees that merchants pay banks every time a customer uses their card. The act was signed into law in 2010.
Among other things, the amendment limited the debit interchange fee to a maximum of 0.05 percent of the transaction value plus 21 cents (with an extra cent for fraud protection). In practice, this brought the average debit card processing fee down 52 percent (from 50 cents to 24 cents), according to the International Center for Law and Economics.
Merchants, as you might expect, rejoiced, but the net effect on consumers wasn’t as positive as intended.
Though their transaction costs had decreased thanks to the Durbin Amendment, most retailers did not pass those savings on to consumers. In fact, only 1 percent of retailers lowered prices, according to the Richmond Fed. And, in an additional blow to consumers, banks reacted to receiving lower interchange fees by scaling back debit card rewards programs, raising other fees (such as ATM and overdraft fees) and making it harder to get a free checking account, the Cato Institute reports.
The Durbin Amendment was well intentioned, but market conditions backfired and prevented consumers from realizing the desired cost savings. Unfortunately, this often happens with fees. They can be like Whack-a-Mole — one goes down, another comes up.
Durbin goes after credit card interchange fees with the Credit Card Competition Act
More recently, Durbin has set his sights on reducing credit card interchange fees.
Merchants love to complain about these levies (the average is about 2.2 percent, according to The Nilson Report). The Merchants Payments Coalition says credit card processing fees are most merchants’ highest cost aside from labor, totaling a record $187.2 billion in 2024. Durbin is the chief architect of the Credit Card Competition Act (CCCA), a bill first introduced in 2023 that seeks to lower merchants’ interchange fee burden, but differently than the Durbin Amendment did for debit cards.
The Credit Card Competition Act seeks to reduce fees by promoting more competition in the payment processing market (that sounds friendly, but I worry about unintended consequences). It would mandate that credit card issuers with assets over $100 billion enable at least two networks for each transaction, and merchants could then choose which to use. Durbin has assailed Visa and Mastercard for allegedly engaging in a price-fixing duopoly. The CCCA includes the provision that Visa and Mastercard can’t be the only available networks. A card issuer could perhaps offer Visa and American Express, for example. Or Mastercard and Discover. There also seems to be the hope that smaller networks could emerge and serve as lower-cost alternatives.
It all sounds fine in theory, and it’s not a hard cap like we saw with the Durbin Amendment’s changes to debit card interchange fees, but the effect on consumers could be similar — reduced credit card rewards, less access to credit and higher fees in other areas.
Proponents, including Durbin and others, argue that merchants will lower prices, but they didn’t do so when debit interchange fees were capped, so it seems unlikely they will this time around.
Still, seizing on a Populist wave that has swept across both major political parties, the Credit Card Competition Act has gained notable co-sponsors from both sides of the political aisle, showcasing Durbin’s reputation as a bipartisan consensus builder.
The bill hasn’t come to a vote; it’s twisting in the political winds. Durbin’s looming retirement could kill its momentum, or it could ignite a late-game push to cement Durbin’s legacy as an interchange-fee fighter.
Similar to the push to cap debit interchange fees, Durbin and his co-sponsors are trying to advocate for consumers via the Credit Card Competition Act. But the financial industry won’t take any threats to its revenue model lightly. Interchange fee reform seems much more likely to benefit retailers than consumers. There are no easy answers, but I believe the current system is better (in terms of rewards, access to credit and more).
The bottom line
Durbin has become synonymous with interchange fees in the financial world, but his overall legacy is much wider-reaching. In a recent retrospective, the Associated Press detailed legislative accomplishments ranging from banning smoking on airplanes to criminal justice system reform, immigration reform and more.
Honestly, banks will probably wish Durbin a happy retirement and hope he takes his interchange fee microscope with him. In the year following the implementation of the debit card interchange cap, the aforementioned Cato Institute report says banks lost out on between $5.1 billion and $7.4 billion in revenue. Unfortunately, most of that seemed to line retailers’ pockets, rather than providing consumers with relief.
Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I’d be happy to help.
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