Q. What is the Durbin Amendment?
A. The Durbin Amendment is a provision in the final Dodd-Frank Wall Street Reform and Consumer Protection Act intended to limit the interchange transaction fee, or "swipe fee." This is the fee the issuer of debit or prepaid cards charges a merchant each time the merchant accepts—swipes—one of these cards. The amendment directs the Federal Reserve to set a fee that is "reasonable and proportional to the cost incurred by the issuer with respect to the transaction." The Federal Reserve set the fee at $0.21 effective October 1, 2011. Banks and credit unions with less than $10 billion in assets are exempt from the rule, as are reloadable prepaid cards.
Q. What is the difference between a credit card, prepaid card, and a debit card?
A. A credit card offers a line of credit; the cardholder is lent the money for the transaction. Total purchases are limited to the card's credit limit. A prepaid card pays for a transaction using the money loaded onto the card. The transaction amount is automatically withdrawn (paid for) from the value (balance) of the card. Total purchases are limited to the value of the card. A debit card pays for a transaction by withdrawing the transaction amount (money) from the cardholder's bank account. Total purchases are limited to the amount of money in that account.
Q. Are consumers protected if a non-reloadable prepaid card is lost or stolen?
A. A non-reloadable card, whether closed system (retailer specific) or open system (branded and affiliated with a network, such as Visa or MasterCard), is generally not registered in the name of the account holder and therefore lacks consumer protections.
Q. Are consumers protected if a general-purpose reloadable (GPR) prepaid card is lost or stolen?
A. If a GPR card is lost or stolen, the consumer is provided with the same voluntary zero liability protection policies that apply to credit and debit cards in the card's payment networks (e.g., Visa and MasterCard). Policies vary by network.