On July 20, the FRB issued its highly anticipated final rule (“Regulation II”) to implement the debit interchange and exclusivity and routing limitations of the so-called “Durbin Amendment.”
The Durbin Amendment and Regulation II provide that the amount of any interchange fee that a debit card issuer may receive for a debit transaction must be “reasonable and proportional” to the issuer’s cost for the transaction. Regulation II specifies that an issuer complies with this interchange limitation if it receives an interchange fee that is no more than the sum of $0.21 plus 5 basis points of the transaction value. In addition, an interim final rule issued by the FRB on the same day provides that an issuer may receive an additional $0.01 fraud adjustment (i.e., increase to interchange) for the transaction if the issuer complies with the FRB’s fraud standards. These interchange limitations will become effective on October 1, 2011.
In addition to its interchange fee limitations, Regulation II prohibits both payment card networks and issuers from limiting: (1) the number of networks on which debit transactions may be processed to less than two unaffiliated networks; and (2) the ability of merchants to route debit transaction for processing over any network that may process such transactions. As a result, an issuer will be required to enable at least two unaffiliated networks on its covered debit cards and then permit merchants to route transactions over either of these networks. In general, these exclusivity and routing requirements will become effective for issuers on April 1, 2012.