Community Bank Relief Act advances to full Senate as amendment to CLARITY Act

Legislation was introduced in the U.S. Senate that would expand exemption from the Durban Amendment to more banks. The Community Bank Relief Act, introduced by Senators Ted Cruz, R-Texas., and Katie Britt, R-Ala., would update the $10 billion asset threshold for exempting financial institutions from the rule that caps debit card fees.

Britt, a member of the Senate Banking Committee, offered the legislation as an amendment to the CLARITY Act, a cryptocurrency marketplace structure bill that the committee voted today, May 14, 2026, to advance to the full Senate.

Under a regulation set by the Federal Reserve in accordance with the Durbin Amendment to the Dodd-Frank Act, banks with assets of at least $10 billion are restricted to charging debit card interchange of no more than 21 cents plus 1 cent for fraud prevention and 0.05 percent of the transaction amount for fraud loss recovery, or 23 to 24 cents per transaction.

Many community banks have blown past the $10 billion threshold since it was set by the Fed in 2011. Under the Cruz-Britt legislation the threshold would initially be increased to $15 billion and tied to annual cost of living adjustments as measured by the Consumer Price Index. When Dodd-Frank passed, roughly 80 FIs exceeded the $10 billion threshold; today it's about 130, Britt noted.

The Merchants Payments Coalition, in a letter urging the Senate Banking Committee to reject the legislation, said the new threshold would exempt two dozen of the 130 FIs currently covered by the regulation.

Consideration of the Cruz-Britt legislation comes as the Fed continues to ruminate over a 2023 proposal to reduce the regulated debit card interchange rate to 14.4 cents per transaction and the fraud rate to 0.04 percent, while increasing the fraud prevention component to 1.3 cents.

Since then, a federal judge ruled in a case brought by Corner Post, a North Dakota truck stop, that the Fed set the rate too high in 2011 by including certain bank costs not set forth by the Durbin Amendment. In a separate case, brought by Linney's Pizza, in Kentucky, a judge ruled that the disputed costs could be included.

Regulatory overreach

"As we've seen in so many instances, countless regulations in the Dodd-Frank Act were not only onerous but set fixed thresholds that have become outdated over time, and the Durbin Amendment is no exception," Sen. Britt said in a statement. "The largest burden is on our smallest financial institutions who provide vital sources of credit to Main Streets that drive our local economies.

"This commonsense legislation would simply index, to both inflation and COLA, the outdated threshold in this provision of Dodd-Frank, ultimately providing relief for our community banks who were never intended to be burdened by this regulation."

"The Durbin Amendment was not designed for the current economic and regulatory reality and subjects community banks to fee limits that the original language intended for much larger institutions," Sen. Cruz said, adding the Community Bank Relief Act "modernizes the interchange fee cap to reflect inflation."

The Cruz-Britt bill has support from Americans for Tax Reform, the Alabama Bankers Association and America's Credit Unions.

"This legislation is an important step forward," said Scott Simpson, president and CEO of America's Credit Unions. "But the only real long-term solution is full repeal of the Durbin Amendment. Government price controls have distorted the market and failed to deliver promised savings to consumers."

Merchants balk

The MPC's letter to the Banking Committee, signed by 17 merchant groups, asserted "there is no justifiable need to change the asset threshold…and there are several compelling reasons not to do it."

FIs covered by the regulation can already charge "quite generous" fees, the letter stated, noting that 23 to 24 cents per transaction is more than five time the average processing cost of 4.1 cents. Exempt banks, the letter claimed, charge an average of 62 cents per transaction, or nearly three times the regulated rate.

Increasing the number of exempt banks "would increase inflation at the checkout counter and the gas pump, and "create an enormous windfall for several dozen banks while burdening merchants and consumers with higher costs and prices," the letter asserted.

The letter went on to state that debit card interchange regulation has saved merchants $9 billion a year, with about 70 percent shared with consumers, largely by holding down prices. However, research by the Federal Reserve Bank of Richmond and other studies have suggested the opposite. The analyses indicate that just a small fraction of merchants lowered prices in response to the Fed capping debit interchange, and that most pocketed the savings.

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