Debit-Card Swipe or Interchange Fees to Be Capped at 21 Cents
June 30, 2011
Federal Reserve Board on Wednesday issued a final rule establishing
standards for debit card interchange fees and prohibiting network
exclusivity arrangements and routing restrictions. This rule, Regulation
II (Debit Card Interchange Fees and Routing), is required by the
Dodd-Frank Wall Street Reform and Consumer Protection Act.
Debit card interchange fees are established by payment card networks and
ultimately paid by merchants to debit card issuers for each electronic
debit transaction. As required by the statute, the final rule
establishes standards for assessing whether debit card interchange fees
received by debit card issuers are reasonable and proportional to the
costs incurred by issuers for electronic debit transactions. Under the
final rule, the maximum permissible interchange fee that an issuer may
receive for an electronic debit transaction will be the sum of 21 cents
per transaction and 5 basis points multiplied by the value of the
transaction. This provision regarding debit card interchange fees is
effective on October 1, 2011.
The Board also approved on Wednesday an interim final rule that allows
for an upward adjustment of no more than 1 cent to an issuer's debit
card interchange fee if the issuer develops and implements policies and
procedures reasonably designed to achieve the fraud-prevention standards
set out in the interim final rule. If an issuer meets these standards
and wishes to receive the adjustment, it must certify its eligibility to
receive the adjustment to the payment card networks in which it
participates. Comments on the interim final rule are due by September
30, 2011. The fraud-prevention adjustment is effective on October 1,
2011, concurrent with the debit card interchange fee limits. The Board
will re-evaluate this adjustment in light of feedback received during
this comment period.
When combined with the maximum permissible interchange fee under the
interchange fee standards, a covered issuer eligible for the
fraud-prevention adjustment could receive an interchange fee of up to
approximately 24 cents for the average debit card transaction, which is
valued at $38.
accordance with the statute, issuers that, together with their
affiliates, have assets of less than $10 billion are exempt from the
debit card interchange fee standards. To assist payment card networks in
determining which of the issuers are subject to the debit card
interchange fee standards, the Board plans to publish by mid-July and
annually thereafter lists of institutions that are above and below the
small issuer exemption asset threshold. Also, the Board plans to
annually survey the networks and publish a list of the average
interchange transaction fees each network provides to its covered and
exempt issuers. This information should enable issuers, including small
issuers, to more readily compare the interchange revenue they would
receive from each network.
The final rule prohibits all issuers and networks from restricting the
number of networks over which electronic debit transactions may be
processed to less than two unaffiliated networks. The effective date for
the network exclusivity prohibition is April 1, 2012, with respect to
issuers, and October 1, 2011, with respect to payment card networks.
Issuers of certain health-related and other benefit cards and
general-use prepaid cards have a delayed effective date of April 1,
2013, or later in certain circumstances.
Issuers and networks are also prohibited from inhibiting a merchant's
ability to direct the routing of the electronic debit transaction over
any network that the issuer has enabled to process them. The merchant
routing provisions are effective on October 1, 2011.