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FRS RIN: 7100-AG67 Publication ID: Fall 2024 
Title: Regulation II -- Debit Card Interchange Fees and Routing (Docket No: R-1818) 
Abstract:

Regulation II implements a provision of the Dodd-Frank Act that requires the Board of Governors of the Federal Reserve System (Board) to establish standards for assessing whether the amount of any interchange fee received by a debit card issuer is reasonable and proportional to the cost incurred by the issuer with respect to the transaction. Under the current rule, for a debit card transaction that does not qualify for a statutory exemption, the interchange fee can be no more than the sum of a base component of 21 cents, an ad valorem component of 5 basis points multiplied by the value of the transaction, and a fraud-prevention adjustment of 1 cent if the issuer meets certain fraud-prevention-standards. The Board developed the current interchange fee cap in 2011 using data voluntarily reported to the Board by large debit card issuers concerning transactions performed in 2009. Since that time, data collected by the Board every other year on a mandatory basis from large debit card issuers show that certain costs incurred by these issuers have declined significantly; however, the interchange fee cap has remained the same. For this reason, the Board proposes to update all three components of the interchange fee cap based on the latest data reported to the Board by large debit card issuers. Further, the Board proposes to update the interchange fee cap every other year going forward by directly linking the interchange fee cap to data from the Board's biennial survey of large debit card issuers. Initially, under the proposal, the base component would be 14.4 cents, the ad valorem component would be 4.0 basis points (multiplied by the value of the transaction), and the fraud-prevention adjustment would be 1.3 cents for debit card transactions performed from the effective date of the final rule to June 30, 2025. The Board also proposes a set of technical revisions to Regulation II.

 
Agency: Federal Reserve System(FRS)  Priority: Substantive, Nonsignificant 
RIN Status: Previously published in the Unified Agenda Agenda Stage of Rulemaking: Proposed Rule Stage 
Major: No  Unfunded Mandates: No 
CFR Citation: 12 CFR 235   
Legal Authority: 15 U.S.C. 1693   
Legal Deadline:  None
Timetable:
Action Date FR Cite
Board Requested Comments  11/14/2023  88 FR 78100   
Board Extended Comment Period  01/29/2024 
Board Expects Further Action  07/00/2025 
Regulatory Flexibility Analysis Required: No  Government Levels Affected: None 
Small Entities Affected: No  Federalism: No 
Included in the Regulatory Plan: No 
RIN Data Printed in the FR: No 
Agency Contact:
Benjamin Snodgrass
Senior Counsel
Federal Reserve System
Legal Division,
Washington, DC 20551
Phone:202 263-4877

Cody Gaffney
Senior Attorney
Federal Reserve System
Legal Division,
Washington, DC 20551
Phone:202 452-2674