Regulation of Debit Interchange Fees. Darryl E. Getter. Specialist in Financial Economics. May 16, Congressional Research Service. In the summer of , the Federal Reserve Board of Governors issued a final rule governing debit card interchange fees. This reg' ulation, named Regulation II. 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.
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These include transfers with automated teller machines ATMspoint-of-sale transactions, and automated clearing house ACH systems.
Regulation E in Practice Much of Regulation E outlines the procedures consumers must follow in reporting errors with EFTs, and the steps a regulation de debit must take to provide recourse. Generally, banks have a period of 10 regulation de debit 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.
At least one group—merchants—realized a legislative goal that had been unimaginable a year earlier: Senate by a bipartisan vote of 64 to This article explores the events that led to passage of the Durbin Regulation de debit and describes the likely impact of this regulation de debit legislation on the banking industry, payments companies, merchants and consumers.
Finally, we discuss whether the Durbin Amendment represents the final battle on debit interchange in the United States, or merely a skirmish in a long-running war.
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 regulation de debit of the dispute were sown by payment processing arrangements and the success of debit cards with American consumers. Understanding the battle over interchange begins with understanding interchange itself.
Regulation of Debit Interchange Fees - Semantic Scholar
When regulation de debit 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 de debit felt their costs for accepting cards were too high and increasing. The total costs to merchants who accept debit cards did rise over time, in part because of the extraordinary success of the product.
- Regulation of Debit Interchange Fees
- Regulation on debit and credit card interchange fees will enter into force on 8 June 2015
Debit share of U. Smaller issuers, such as community 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 regulation de debit costs, merchants sought relief in the courthouse and in Congress.
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As interchange revenues climbed in the mid-nineties, payment networks began to face antitrust litigation over their practices. Beginning in regulation de debit, various class action and Department of Justice lawsuits were filed against Visa U.
In the intervening decade, most of these claims were settled, and both Visa and MasterCard became publicly-owned institutions. Largely under the auspices of the Merchants Payments Coalition,  and with the support of Senator Durbin, merchants regulation de debit several unsuccessful attempts at legislation regulating interchange rates.
Few in Congress understood the issues surrounding interchange, regulation de debit 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 on debit and credit card interchange fees will- Publications - Eversheds Sutherland
Dodd-Frank required the Board to establish its interchange fee standards no later than April 21,with final rules effective on Regulation de debit 21, Interested parties also provided written submissions. Each is described below. Regulation of Interchange Fees. The Board provides an additional allowance for fraud prevention equal to 1 cent per transaction, provided the issuer adopts fraud prevention procedures established regulation de debit the regulation.
The statute also provides that the Federal Reserve may regulate fees charged by payment networks, but only for the purpose 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 regulation de debit 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 addition to regulation de debit rules regarding restrictions on interchange fees, the Board also is required by Dodd-Frank to prescribe certain rules regarding transaction routing.