Fed Interchange Report: No Reg II Changes on the Horizon
The Fed will maintain its interchange fee standard and fraud prevention adjustment after reviewing data from a September interchange report.
The Federal Reserve Board will maintain its interchange fee standard and fraud prevention adjustment after reviewing data from an interchange report it issued in September.
The report, published every two years under the Electronic Fund Transfer Act, contains summary information on the volume and value, interchange fee revenue, certain issuer costs, and fraud losses related to debit card transactions in 2013.
The Fed’s Regulation II (Debit Card Interchange Fees and Routing) states a debit card issuer subject to the interchange fee standard (a covered issuer) may not receive an interchange fee that exceeds 21 cents plus 5 basis points multiplied by the value of the transaction, plus a 1-cent fraud prevention adjustment, if eligible. The interchange fee standard doesn’t apply to debit card issuers with consolidated assets of less than $10 billion, certain government- administered debit cards, and certain prepaid cards.
The Fed estimates debit card fraud losses to all parties (merchants, cardholders, and issuers) at $1.57 billion in 2013, with an average loss of approximately 8 basis points as a share of transaction value—up slightly from 2011. The median covered issuer’s average fraud loss as a share of transaction value was 5 basis points, up slightly from 4.7 basis points in 2011. The median covered issuer had average fraud prevention and data security costs of slightly more than 1.4 cents per transaction.