WASHINGTON—With a reissue deadline approaching, the Federal Reserve’s final rule on Regulation II, which covers debit card interchange fees and network routing exclusivity, has been broken down by NAFCU.
The final rule requires debit card issuers to enable and allow merchants to choose from at least two unaffiliated networks for card-not-present (CNP) transactions, such as online purchases.
NAFCU noted that to the extent debit card issuers do not currently have this capability on their debit cards, they will need to reissue their debit cards by July 1, 2023.
In addition, the final rule notes that credit unions do not need to affirmatively guarantee that two unaffiliated networks will always be available to all merchants in every conceivable transaction context. Instead, credit unions must configure their debit cards so that transactions performed with the card can be processed on at least two unaffiliated networks, NAFCU explained.
Other Points Raised
Other key points of the final regulation that credit unions must take into consideration, according to NAFCU:
- The final rule does not alter interchange fees
- The final rule does not alter the Regulation II exemption from interchange fee limitations for financial institutions with less than $10 billion in assets
- The rule clarifies that the requirement for at least two unaffiliated payment networks to be enabled, which has applied to debit card transactions in general since 2011, now explicitly applies to CNP transactions
- The final rule considers the requirement satisfied if the issuer has enabled a combination of networks that avoids network exclusivity and the networks have each taken steps reasonably designed to be able to process electronic debit transactions
Effective Mid 2023
The rule will become effective July 1, 2023. For detailed background information of the finalized rule, including a section-by-section analysis, view the Final Regulation.
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