Durbin Amendment Small Bank Exemption: $10B Test and Routing Rules

The Durbin Amendment small bank exemption releases any debit card issuer with less than $10 billion in consolidated assets from the federal cap on interchange fees. Exempt issuers collect whatever rate the payment networks set instead of the regulated ceiling that binds larger banks, and the difference is substantial: in 2024, exempt issuers averaged $0.51 per debit transaction while covered issuers averaged $0.23.¹ The exemption comes from Section 1075 of the Dodd-Frank Act and is implemented through the Federal Reserve’s Regulation II.²

How the $10 Billion Test Works

The line sits at exactly $10 billion in consolidated assets, measured on December 31. Whatever an issuer’s total is on that date determines whether it is exempt or covered for the entire following calendar year.³ A bank hovering near the threshold has good reason to manage its balance sheet carefully as year-end approaches.

“Consolidated” is the operative word. A community bank’s own balance sheet is not the full picture. Its assets are combined with those of its parent holding company and every affiliate under common ownership. A holding company running three subsidiary banks at $4 billion each is a $12 billion institution for this purpose, and none of the three subsidiaries qualifies as exempt.³ The rule prevents large banking networks from carving themselves into smaller legal entities to slip under the cap.

The $10 billion figure is a fixed statutory number. It has not been adjusted for inflation since the Durbin Amendment took effect in 2011, so more institutions cross it over time through ordinary growth and rising asset values, even without expanding their operations in any meaningful way.

The exemption covers any insured depository institution that issues debit cards and holds the accounts being debited: commercial banks, savings associations, and credit unions. Two conditions must both be true. The issuer has to hold the account that gets debited, and the issuer plus all affiliates must have less than $10 billion in consolidated assets as of the prior December 31.³ The vast majority of debit card issuers in the United States qualify.

What the Exemption Actually Frees a Bank From

Only the interchange fee cap. Covered issuers face a ceiling of 21 cents plus 5 basis points per transaction, with up to 1 cent more available for meeting fraud-prevention standards.² Exempt issuers face no such federal ceiling. Their fees are set by Visa, Mastercard, and PIN networks like STAR, NYCE, and Pulse, and those network rates run considerably higher than the regulated cap.¹

That is the headline benefit. It is not the whole picture.

Routing Rules Still Apply

The exemption does not lift the network routing requirements in Regulation II. Every debit card issuer, regardless of size, must configure its cards so each transaction can run on at least two unaffiliated payment card networks, across every geographic area, merchant type, and transaction type.² A small bank cannot issue a debit card that runs only on Visa. It has to enable at least one unaffiliated PIN network too.

Once both networks are enabled, the merchant chooses which one to route the transaction over, and merchants generally pick the cheaper option. That routing freedom puts downward pressure on the PIN-network rates that exempt issuers can charge, which is why the real-world value of the exemption is narrower than the raw fee gap suggests.

Other Exemptions That Are Not the Small Issuer Exemption

Two other categories of debit transactions escape the fee cap regardless of issuer size, and they are easy to confuse with the small bank exemption:

Government benefit cards, provided the cardholder can only use the card to access funds from that specific government payment program.³
Certain reloadable general-use prepaid cards, provided they are not marketed as gift cards and serve as the sole means of accessing the loaded funds.³

Both of these are lost if the issuer charges overdraft fees or charges a fee for the first ATM withdrawal each month from the issuer’s own ATM network. At that point the card falls under the fee cap unless the issuer separately qualifies as a small issuer under the $10 billion test.³

Crossing the Threshold

Losing the Exemption

An exempt issuer that reports $10 billion or more in consolidated assets on December 31 does not lose its exemption immediately. It has until July 1 of the following year to come into compliance with the fee caps and the related requirements.³ Those six months give the bank time to coordinate with the payment networks and adjust revenue projections.

The revenue drop is steep. Moving from an average of $0.51 per transaction to roughly $0.23 cuts debit interchange revenue by more than half on every swipe. For a bank processing millions of transactions a month, the transition represents tens of millions of dollars in annual revenue, and banks approaching the line often plan years ahead for it.

Regaining the Exemption

The rule runs in both directions. A covered issuer whose consolidated assets drop below $10 billion on December 31 regains exempt status automatically for the following calendar year and stops being subject to the Federal Reserve’s Debit Card Issuer Survey reporting during any period it is not covered.⁴ In practice this is uncommon and usually reflects asset sales, divestitures, or a significant downturn.

Enforcement and Who Can Sue

There is no dedicated enforcement body for the interchange fee and routing rules. The appropriate federal banking agency enforces the requirements against banks and savings associations, and the National Credit Union Administration handles credit unions.⁵ Violations are treated as violations of each agency’s governing statute, so regulators reach for their standard tools, including cease-and-desist orders and civil money penalties.

Two limits are worth flagging. The Consumer Financial Protection Bureau, which enforces other parts of the Electronic Fund Transfer Act, has no authority over the interchange fee provisions.⁵ And the statute excludes private lawsuits: the civil and criminal liability provisions that cover other EFTA violations do not extend to the interchange fee rules.⁶ A merchant who thinks a bank is charging above the cap cannot sue the bank directly; the complaint has to go through the banking regulators.

Pending Changes to the Covered Cap

The cap on covered issuers has held at 21 cents plus 5 basis points since 2011. In October 2023 the Federal Reserve proposed lowering it based on updated issuer cost data, along with a mechanism to reset the cap automatically every two years from future cost surveys.⁷ As of mid-2025 the existing fee standard faced a legal challenge when a federal district court vacated it, and the regulatory picture remains unsettled. Any move on the covered cap does not change who qualifies as a small issuer, but it widens or narrows the revenue gap the exemption is worth.

1
Federal Reserve Board. Average Debit Card Interchange Fee by Payment Card Network
2
eCFR. 12 CFR Part 235 – Debit Card Interchange Fees and Routing (Regulation II)
3
eCFR. 12 CFR 235.5 – Exemptions
4
Federal Register. Debit Card Interchange Fees and Routing
5
Office of the Law Revision Counsel. 15 USC 1693o – Administrative Enforcement
6
Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions
7
Federal Reserve. Federal Reserve Board Requests Comment on a Proposal to Lower the Maximum Interchange Fee That a Large Debit Card Issuer Can Receive for a Debit Card Transaction