Debit Card Interchange Fees and Routing

Document Headings Document headings vary by document type but may contain the following: the agency or agencies that issued and signed a document the number of the CFR title and the number of each part the document amends, proposes to amend, or is directly related to the agency docket number / agency internal file number the RIN which identifies each regulatory action listed in the Unified Agenda of Federal Regulatory and Deregulatory Actions See the Document Drafting Handbook for more details. Federal Reserve System 12 CFR Part 235 [Regulation II; Docket No. R-1818] RIN 7100-AG67 ( printed page 78100) AGENCY: Board of Governors of the Federal Reserve System (Board). ACTION: Notice of proposed rulemaking. SUMMARY: Regulation II implements a provision of the Dodd-Frank Act that requires the Board to establish standards for assessing whether the amount of any interchange fee received by a debit card issuer is reasonable and proportional to the cost incurred by the issuer with respect to the transaction. Under the current rule, for a debit card transaction that does not qualify for a statutory exemption, the interchange fee can be no more than the sum of a base component of 21 cents, an ad valorem component of 5 basis points multiplied by the value of the transaction, and a fraud-prevention adjustment of 1 cent if the issuer meets certain fraud-prevention-standards. The Board developed the current interchange fee cap in 2011 using data voluntarily reported to the Board by large debit card issuers concerning transactions performed in 2009. Since that time, data collected by the Board every other year on a mandatory basis from large debit card issuers show that certain costs incurred by these issuers have declined significantly; however, the interchange fee cap has remained the same. For this reason, the Board proposes to update all three components of the interchange fee cap based on the latest data reported to the Board by large debit card issuers. Further, the Board p…