Reg II IFRM Press Release

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Press Release

Release Date: June 29, 2011
For immediate release
The Federal Reserve Board on Wednesday issued a final rule establishing standards for debit card
interchange fees and prohibiting network exclusivity arrangements and routing restrictions. This
rule, Regulation II (Debit Card Interchange Fees and Routing), is required by the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
Debit card interchange fees are established by payment card networks and ultimately paid by
merchants to debit card issuers for each electronic debit transaction. As required by the statute, the
final rule establishes standards for assessing whether debit card interchange fees received by debit
card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit
transactions. Under the final rule, the maximum permissible interchange fee that an issuer may
receive for an electronic debit transaction will be the sum of 21 cents per transaction and 5 basis
points multiplied by the value of the transaction. This provision regarding debit card interchange
fees is effective on October 1, 2011.
The Board also approved on Wednesday an interim final rule that allows for an upward adjustment
of no more than 1 cent to an issuer's debit card interchange fee if the issuer develops and
implements policies and procedures reasonably designed to achieve the fraud-prevention standards
set out in the interim final rule. If an issuer meets these standards and wishes to receive the
adjustment, it must certify its eligibility to receive the adjustment to the payment card networks in
which it participates. Comments on the interim final rule are due by September 30, 2011. The fraudprevention adjustment is effective on October 1, 2011, concurrent with the debit card interchange
fee limits. The Board will re-evaluate this adjustment in light of feedback received during this
comment period.
When combined with the maximum permissible interchange fee under the interchange fee standards,
a covered issuer eligible for the fraud-prevention adjustment could receive an interchange fee of up
to approximately 24 cents for the average debit card transaction, which is valued at $38.
In accordance with the statute, issuers that, together with their affiliates, have assets of less than $10
billion are exempt from the debit card interchange fee standards. To assist payment card networks in
determining which of the issuers are subject to the debit card interchange fee standards, the Board
plans to publish by mid-July and annually thereafter lists of institutions that are above and below the
small issuer exemption asset threshold. Also, the Board plans to annually survey the networks and
publish a list of the average interchange transaction fees each network provides to its covered and
exempt issuers. This information should enable issuers, including small issuers, to more readily
compare the interchange revenue they would receive from each network.
The final rule prohibits all issuers and networks from restricting the number of networks over which
electronic debit transactions may be processed to less than two unaffiliated networks. The effective
date for the network exclusivity prohibition is April 1, 2012, with respect to issuers, and October 1,
2011, with respect to payment card networks. Issuers of certain health-related and other benefit
cards and general-use prepaid cards have a delayed effective date of April 1, 2013, or later in certain
circumstances.
http://www.federalreserve.gov/newsevents/press/bcreg/20110629a.htm

6/30/2011

Printer Version - Board of Governors of the Federal Reserve System

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Issuers and networks are also prohibited from inhibiting a merchant's ability to direct the routing of
the electronic debit transaction over any network that the issuer has enabled to process them. The
merchant routing provisions are effective on October 1, 2011.
The Board's notices for the final rule and the interim final rule that will be published in the Federal
Register are attached.
Statement by Chairman Ben S. Bernanke
Statement by Vice Chair Janet L. Yellen
Interim final rule (114 KB PDF)
Final rule (742 KB PDF)
2009 Interchange Revenue, Covered Issuer Cost, and Covered Issuer and Merchant Fraud Loss
Related to Debit Card Transactions (134 KB)
For media inquiries, call 202-452-2955.

http://www.federalreserve.gov/newsevents/press/bcreg/20110629a.htm

6/30/2011