WASHINGTON (CN) – Debit card issuers can charge up to 1 cent per transaction to pay for programs to detect and prevent fraudulent electronic debit transactions, according to final rules adopted by the Federal Reserve.
The Fed action makes final interim rules adopted last July. The rules implement amendments to the Electronic Funds Transfer Act, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, to define the rights of consumers and the responsibilities of card issuers and transaction processors.
Of particular interest to consumers and shop owners are the provisions requiring issuers and processing networks to allow people who accept debit cards to route transactions over any network they choose.
Previously, card issuers could override the networks used by a merchant to process their transactions and route them through their own system or those of a preferred vendor. Under the new rules, such arrangements are banned as are preferential pricing regimes meant to favor one network over another.
In addition to the 1 cent charge for anti-fraud measures, the Fed has adopted an interchange transaction fee standard allowing card issuers and network operators to receive up to a 21 cent per transaction fee with up to a 5 basis point addition based on the value of the transaction.
Network operators and card issuers will have to prove that their fees are just high enough to cover allowable costs, such as operating the system, recouping their initial investment and improving security.
The Fed specifically forbids overall corporate costs, product and delivery of the cards, network membership fees and costs related to marketing accounts, from being included in the transaction fee.
Issuers that, together with affiliates, less than $10 billion in assets, debit cards issued under certain government-administered programs, and certain reloadable prepaid cards are all exempt from the interchange fee standard.