Regulation of Interchange Fees. Under Dodd-Frank, the amount of any interchange fee with respect to an electronic debit transaction received. On 19 May , the Regulation on Interchange Fees for Card-Based Payment Transactions (the Regulation) was published in the Official. That regulation, which resulted from the Durbin Amendment to the Dodd–Frank Act, capped debit card interchange fees for banks with over $10 billion in assets.


Author: Allen Nolan
Country: Czechia
Language: English
Genre: Education
Published: 21 February 2015
Pages: 640
PDF File Size: 28.71 Mb
ePub File Size: 49.5 Mb
ISBN: 630-9-65026-737-5
Downloads: 61134
Price: Free
Uploader: Allen Nolan


regulation de debit Regulation E in Practice Much of Regulation E outlines the procedures consumers must follow in reporting errors with EFTs, regulation de debit the steps a bank must take to provide recourse. Generally, banks have a period of 10 business days during which to investigate a reported EFT error; however, this can be extended to 45 business days provided that the bank provisionally credits the consumer's account with the reportedly missing funds.

Debit Interchange Regulation: Another Battle or the End of the War?

Banks must then report the results of an investigation to the Federal Reserve and to the consumer. The Durbin Amendment was preceded by a long-running feud over interchange, with retailers on one side, and payment networks and the banking industry on the other.

The seeds regulation de debit the dispute were sown by payment processing arrangements and regulation de debit success of debit cards with American consumers.

Understanding the battle over interchange begins with understanding interchange itself. When a consumer uses a debit card to make a purchase, the merchant does not receive the full purchase amount, because a portion of the sale is deducted to compensate other parties to the transaction.

Regulation E

Retailers felt their costs for accepting cards were too high and increasing. The total costs to regulation de debit who accept debit cards did rise over time, in part because of the extraordinary success of the product.

Debit share of U. Smaller issuers, such as regulation de debit banks and credit unions, rely on interchange fees as a significant source of revenue for their card operations, and card operations were highly profitable activities for large banks, as well.

Faced with escalating processing costs, merchants sought relief in the courthouse and in Congress.

Regulation on debit and credit card interchange fees will- Publications - Eversheds Sutherland

As interchange revenues climbed in the mid-nineties, payment networks began to face antitrust litigation over their practices. Beginning invarious class action and Department of Justice lawsuits were filed against Visa U.

In the regulation de debit decade, most of these claims were settled, and both Visa and MasterCard became publicly-owned institutions.

Largely under the auspices regulation de debit the Merchants Payments Coalition, [10] and with the support regulation de debit Senator Durbin, merchants made several unsuccessful attempts at legislation regulating interchange rates.

Few in Congress understood the issues surrounding interchange, and industry leaders and members of Congress already were grappling with the complexities of other provisions of the 2, page bill that ultimately became Dodd-Frank. In adopting final interchange regulations, Federal Reserve Governors and staff believed their hands were tied by a narrow statutory mandate.

Regulation of Debit Interchange Fees - Semantic Scholar

Dodd-Frank required the Board regulation de debit establish its interchange fee standards no later than April 21,with final rules effective on July 21, Interested parties also provided written submissions. Each is described below. Regulation of Interchange Fees.

The Board regulation de debit an additional allowance for fraud prevention equal to 1 cent per transaction, provided the issuer adopts fraud prevention procedures established under the regulation. The statute also provides that the Federal Reserve may regulate fees charged by payment networks, but only for the regulation de debit of ensuring that the network fee is not used to circumvent the interchange fee provisions.

To prevent circumvention or evasion of the limits on interchange fees, the rule prohibits an issuer from receiving net compensation from a debit card network, excluding interchange fees.

In other words, the total amount of compensation provided by the network to the issuer, such as rebates, incentives or payments, may not exceed the total amount of fees paid by the issuer to the network.

In regulation de debit to prescribing rules regarding restrictions on interchange fees, the Board also is required by Dodd-Frank to prescribe certain rules regarding transaction routing. The Board regulations must provide that neither an issuer nor a payment network may i restrict the number of payment card networks on which a transaction is processed to only one network, or ii inhibit a merchant who accepts debit cards from directing the routing of transaction processing over any payment card network that may process such transaction.

Under this approach, it is sufficient for an issuer to issue a debit card that can be processed regulation de debit one signature-based network and one PIN-based network, or alternatively, two signature-based networks, provided that the networks are not affiliated.

In practice, this means issuers will choose two or more unaffiliated payment card networks over which an electronic debit transaction may be carried, and merchants not issuers or networks will be able to direct the routing of the transaction from among the networks chosen by the issuer.

The statute provides that a network may not keep a merchant from offering a discount or other in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards, provided the regulation de debit does not distinguish on the basis of issuer or payment card network in the case of debit or credit cards.


While the statute provides that final rules should be effective July 21,the final rule regulation de debit a more practical approach. The Board rule ensures that the fraud prevention adjustment would apply at the same time as interchange fee provisions become effective, and provides additional time to account for technology challenges.

Related Post