Q: What types of payment card networks might an issuer enable to satisfy the two- unaffiliated-networks requirement?
A: An issuer may satisfy the nonexclusivity requirements by enabling any two networks so long as the networks are unaffiliated and have reasonable capacity. For example, an issuer may enable a signature-based network and an unaffiliated PIN-based network on a debit card. Similarly, an issuer may enable two unaffiliated PIN networks (and no signature-based network). An issuer also may enable a signature network and an affiliated PIN network, provided the issuer also enables another unaffiliated PIN or signature network on the card. ATM-only networks don’t count toward the number of unaffiliated networks enabled on the card.
Q: How does an issuer know whether a payment card network is eligible to be one of the unaffiliated networks on a debit card?
A: An issuer should contact its payment card network (or the payment card network it wishes to enable on its card) to determine whether that network has rules or policies to restrict operation to a geographic area, specific merchant, or particular type of merchant or transaction. Issuers also should find out whether the payment card network has taken steps reasonably designed to enable it to process the electronic debit transactions that the network would reasonably expect will be routed to it.
Q: When must an issuer comply with the prohibition on network exclusivity?
A: In general, issuers must enable at least two unaffiliated payment card networks on each debit card by April 1, 2012. Payment card networks may not prohibit an issuer from enabling two unaffiliated networks on each debit card beginning Oct. 1, 2011.
Q: May payment card networks or card issuers place limitations on debit card transaction routing by merchants?
A: No. Regulation II prohibits an issuer or payment card network from directly or indirectly inhibiting merchants’ abilities to route electronic debit transactions for processing over any payment card network of the merchant’s choosing.
Q: When must issuers and networks stop inhibiting merchant routing choice?
A: Issuers and networks must not inhibit merchant routing choice beginning Oct. 1, 2011.
Q: Where do credit unions go for questions?
A: Federally insured credit unions should direct specific implementation questions to NCUA, and state-chartered credit unions should refer to the Federal Trade Commission. Direct general questions to the Federal Reserve Board.
This is just a snapshot of the Fed’s Q&As. For more information, refer to the Fed’s Regulation II compliance guide—“Debit Card Interchange Fees and Routing: A Small Entity Compliance Guide”—available on CUNA’s e-Guide (cuna.org, select “regulations & compliance”).
VALERIE Y. MOSS is CUNA’s director of compliance information. Contact CUNA’s compliance department at email@example.com.