Durbin’s Unintended Consequence for the Underbanked

From: American Banker

By Jennifer Tescher

The Federal Reserve’s recently finalized interchange rules have unexpectedly crimped the prepaid debit card market and will make it even tougher for underserved consumers to gain access to the multifaceted financial products they need to get ahead. 

In attempting to keep large banks from abusing the interchange cap exemption for reloadable prepaid cards, the Fed may have inadvertently scuttled one of the most promising opportunities for banks to profitably serve low-balance account holders who are likely to question the value of traditional checking accounts once they are no longer free.


Federal Reserve Releases Debit Interchange Transaction Security Interim Rule

Advance copies of the Federal Reserve’s Final Rule on Debit Card Interchange and Routing and the Board’s Interim Final Rule (IFR) with Comment Period on adjusting allowable interchange fees for fraud prevention costs.  As the IFR states, 


The provisions allow an issuer to receive an adjustment of 1 cent to its interchange transaction fee if the issuer develops, implements, and updates policies and procedures reasonably designed to identify and prevent fraudulent electronic debit transactions; monitor the incidence of, reimbursements received for, and losses incurred from fraudulent electronic debit transactions; respond appropriately to suspicious electronic debit transactions so as to limit the fraud losses that may occur and prevent the occurrence of future fraudulent electronic debit transactions; and secure debit card and cardholder data.


Federal Reserve Publishes List of Small Bank Debit Interchange Exemptions

From: Federal Reserve


USAA to Eliminate Debit Rewards

From: Bank Systems and Technology

In anticipation of lost debit interchange fees as the result of Durbin Amendment caps, USAA Bank is eliminating its debit rewards program in order to continue its more-popular free checking and ATM fee refunds.

San Antonio-based USAA Bank will eliminate its debit card rewards program in a move it says will offset projected revenue losses from federally-capped debit interchange fees and allow the bank to maintain more popular perks such as free checking accounts and ATM fee refunds.