On 20 April 2015, the Council of European Union formally adopted the Regulation on Interchange Fees for Card-Based Payment Transactions (“the Regulation”). The Regulation will apply caps on the interchange fees charged by cardholders’ banks to retailers’ banks every time a consumer makes a card based purchase. This follows the European Parliament’s approval of the text of the Regulation at first reading on 10 March.
The Regulation will cap the interchange fees for domestic debit card transactions to 0.2% of the value of the transaction (Member States may allow a per transaction interchange fee of no more than 5 Eurocents in combination with the 2% cap), and for domestic credit card transactions to 0.3% of the value of the transaction (which may be set lower by individual Member States). For international debit and credit card transactions, the fees will be capped at 0.2% and 0.3% respectively. The fees will begin to apply 6 months from 20 days after the publication of the Regulation in the Official Journal.
The Regulation also introduces business rules including - a prohibition on territorial restrictions in licences, separation of payment card schemes from processing entities, a prohibition on rules hindering co-badging, “unblending” of transaction charges, restrictions on the “honour all cards” rule, a ban on steering rules, and a requirement for information to be provided to merchants in respect of transactions.
This Regulation has been in the pipeline since July 2013 when it was first proposed by the Commission. However, it was not until December 2014, that the European Commission and the European Parliament agreed the key terms of the Regulation. Our briefing of 18 December 2014 sets out the key provisions of the Regulation.
A link to the text of the Regulation which has been approved by the European Parliament and the Council can be found on this here.
Margrethe Vestager, the European Commissioner for Competition, has welcomed the introduction of the cap: "For too long, uncompetitive and hidden bank interchange fees have increased costs of merchants and consumers…This legislation will put a cap on interchange fees, make them more transparent and remove a hurdle to rolling out innovative payment technologies. It is good for consumers, good for business and good for innovation and growth in Europe. As cards are the most widely used means of online payment, this Regulation is also an important building block to complete the European Digital Single Market."
The Regulation will shortly be published in the Official Journal. This will trigger the dates on which the Regulation will enter into force, as set out in the timeline below:
D (20 days after the date of publication of the Regulation in the Official Journal)
- Ban on “steering rules” comes into force
D + 6 months
- The new interchange fee caps come into force
- Debit card transactions – Domestic: 0.2% of the value of the transaction or a per transaction fee of no more than €0.05 with a 0.2% cap and International 0.2% of the value of the transaction
- Credit card transactions – Domestic: 0.3% of the value of the transaction but Member States may define a lower cap and International: 0.3% of the value of the transaction
- “Universal”* card transactions – 0.2% of the value of the transaction or a per transaction fee of no more than €0.05 with a 0.2% cap and 0.3% of the value of the transaction for those transactions treated as credit card transactions
- Territorial restrictions within the EU are prohibited
- Payee’s payment service provider (“PSP”) must provide the payee with a breakdown of the charges for a card transaction including the interchange fee and the merchant services charge (“MSC”)
D + 1 year
- Payment card schemes and processors must be independent, and cannot present bundled prices for both services
- Any rules hindering the co-badging of two or more payment brands or applications are prohibited
- The acquiring PSPs must offer and charge MSCs to the payees on an “unblended” basis
- “Honour all cards” rule is abolished
D + 1½ years
- Member States may no longer define a share of no more than 30% of the domestic payment transactions for“universal” cards to be treated as credit card transactions
D + 3½ years
- Three party payment card schemes† are no longer exempted from the Regulation
D + 5½ years
- Member States are no longer allowed to permit PSPs to apply a weighted average interchange fee