US debit interchange fees have been capped at
21 cents – almost double the amount first proposed by the Federal
Reserve Board.
Despite mounting pressure from fierce
opposition and missing its 21 April deadline, the Fed has issued a
final rule establishing standards for debit card interchange fees,
prohibiting network exclusivity arrangements and routing
restrictions. The rule, Regulation II (Debit Card Interchange Fees
and Routing), sits under the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
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Under the final rule, the maximum permissible
interchange fee that an issuer may charge for a debit transaction
is of 21 cents and 5 bp multiplied by the value of the transaction.
The provision will become effective 1 October 2011.
An interim final rule that allows for an
upward adjustment of no more than 1 cent to an issuer’s debit card
interchange fee has also been approved, on the condition that the
issuer “develops and implements policies and procedures reasonably
designed to achieve fraud-prevention standards as set out by the
Fed.”
According to the Fed, an issuer eligible for
the fraud prevention adjustment could receive an interchange fee of
up to approximately 24 cents for the average debit card transaction
– valued at $38.
Comments on the interim final rule are due by
30 September and the Board has expressed its commitment to
re-evaluate the adjustment in light of feedback received.
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By GlobalDataThe Fed’s final ruling also 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. This ruling will come into effect for
card issuers on 1 April 2012 and payment card networks on 1 October
2011. Issuers of certain health-related and other benefit cards and
general-use prepaid cards have a delayed effective date of 1 April
2013, or later in certain circumstances.
Issuers and networks are also prohibited from
inhibiting a merchant’s ability to direct the routing of a debit
transaction over any network that the issuer has enabled to process
them.
Issuers that, together with their affiliates,
have assets of less than $10bn are exempt from the debit card
interchange fee standards. In order to assist payment card networks
to separate those that banks that are covered and exempt, the Fed
plans to publish by mid-July, and annually thereafter, lists of
institutions that are above and below the small issuer exemption
asset threshold.
