WASHINGTON (9/14/11)--The Federal Reserve Board Tuesday released compliance guidance on debit card interchange fees and routing, guidance that is targeted to credit unions and other “small entities.” The guidance on the Fed’s Regulation II is comprised of 14 compliance questions with their related answers. Regulation II implements the provisions of section 920 of the Electronic Funds Transfer Act that govern debit card interchange fees and network routing and exclusivity limitations. The section was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Topics in the compliance guide range from:
* What does section 920 of the Electronic Fund Transfer Act require? * Which issuers are not subject to the interchange fee standards?
* What types of payment card networks may an issuer enable to satisfy the two-unaffiliated-networks requirement? * Is there more guidance on the provisions of Regulation II? * And more.
It was the Dodd-Frank Act, of course, that required the Fed to set a debit interchange fee cap. The Fed's final rule caps large issuer debit interchange fees at 21 cents, and allows an additional five basis points per transaction may be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed established fraud prevention standards. Card issuers with less than $10 billion in assets--like most credit unions--are exempt from the fee cap. However, the routing and exclusivity rules apply to all debit card issuers regardless of asset size. On routing, Regulation II prohibits issuers and payment card networks from limiting merchants’ ability to choose the network through which a transaction is routed, effective Oct. 1. On exclusivity, Regulation II requires an issuer’s debit card can be processed by at least two unaffiliated card networks, such as one signature network and one unaffiliated PIN network. That goes into effect April 1, 2012. Use the resource link to access the Fed guidance.