The Dodd-Frank Act amended the Electronic Fund Transfer Act by adding Section 920 regarding interchange transaction fees and rules for debit card transactions. The Federal Reserve Board’s new Regulation II implements Section 920, establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions.
Regulation II establishes a base fee cap of 21 cents plus five basis points of the transaction amount to cover fraud losses. This provision is effective on Oct. 1, 2011. The Fed published an interim rule allowing an issuer to receive an additional one cent per debit card transaction if the issuer satisfies certain fraud prevention requirements. The interim rule also is effective on Oct. 1, 2011. Highlights include:
Regulation II requires a card issuer or payment card network to ensure debit cards can be processed on at least two unaffiliated networks, for example, one signature network and one PIN network if the card has both signature and PIN capabilities.
And the regulation prohibits issuers and payment card networks from limiting a merchant’s ability to choose the network on which a transaction is routed, with respect to those networks on which the debit card is enabled to be used.
Visit CUNA’s e-Guide to Federal Laws and Regulations at cuna.org.
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