Business Break for Merchants

New laws, such as changing Durbin announced soon accept a reduction in costs for merchants, debit cards. The Durbin amendment also increase competition by preventing the networks of credit / debit to place restrictions on anti-competitive suppliers.

The new law comes into force on 1 October.

With a lack of supervision of the federal government, have exchange rates in the United States are among the highest in the world. Although the cost is for the treatment of debit cards is lower than the fees associated with credit cards and trade taxes are still high.

The Durbin amendment sets a ceiling of 0.21 hundredths of an exchange of debit card, a reduction of about 53% percent below current levels. After changing the rules of Durbin enter into force, companies must renegotiate their current pricing structure to lower prices are passed back to them.

The Durbin amendment provisions

The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010. § 1075 of the Act, the Durbin amendment is known, contains the following provisions:

· Allows dealers discounts to customers who have money, checks and debit cards, or to offer a competing network (for example, the amendment would allow a company that offers a discount for using Visa or Mastercard Discover a client has accepted - Visa currently) prohibits.

· Allows dealers a $ 10 minimum for credit card transactions without penalty from card networks.

· Prevents card networks to request that their debit cards can not be processed on a network of debt. Traders can use a series of networks for PIN debit transactions, but the major networks negotiated exclusive agreements with many banks, the PIN single network. (The logo appears on the credit card PIN debit network exclusive.) Amendment increases competition by prohibiting such exclusivity.

· Requires the Federal Reserve to determine whether the current structure of interchange fees is "reasonable and proportionate" to the actual costs of processing a transaction card debt.

Why the need for change Durbin?

Increased use of credit cards and debit consumers through higher costs for merchants and often in the form of higher interchange fees.

Interchange fees, which the lion's share of all costs of credit card / debit card to cover the cost of processing a transaction. However, these costs have continued to increase despite the reduction in costs.

Why the increase? Competition between issuers of Visa and MasterCard (which receives the exchange of taxes) to win was a pilot, because the costs for the bonus programs and more attractive (which emphasized the merchant on the exchange rate).

More importantly, Visa and MasterCard over 80% of card transactions to go, 80% of interchange fees, only a dozen major banks. This high market share has led to price increases without negative effects on competition. The banks could not compete or negotiate with merchants on interchange fees, and there was no restriction on Visa and MasterCard are able to set rates to unreasonable levels.

In addition, retailers have a limited ability to refuse credit cards and have not been able to offer customers preferential prices for alternative payment methods. Visa and MasterCard do not discriminate against the use of credit / debit cards.