interchange fee regulation

4. Click the links below to learn more about how the IFR affects people and businesses. 7. It also seeks views on exercising the national discretions the IFRaffords to member s… Member States shall designate competent authorities that are empowered to ensure enforcement of this Regulation and that are granted investigation and enforcement powers. Notices we have issued to card schemes - January 2018. In addition to the interchange fee caps, the IFR also introduced a number of business rules. 5. Those restrictions should be limited and considered acceptable only to enhance consumers' protection, giving to the consumers an adequate level of certainty about the fact that their payment cards will be accepted by the merchants. 2. However: in the case of distance sales or distance contracts (i.e. Directive 2007/64/EC of the European Parliament and of the Council (4) has provided a legal foundation for the creation of a Union-wide internal market for payments as it substantially facilitated the activity of payment service providers, creating uniform rules with respect to the provision of payment services. All debit and credit card-based payment transactions should be subject to a maximum interchange fee rate. Even if merchants are aware of the different costs, the scheme rules often prevent them from acting to reduce the fees. Reporting obligations should extend to payment service providers such as issuers or acquirers and not only to payment card schemes, in order to ensure that any relevant information is made available to the competent authorities which should, in any case, be able to require that such information is collected through the payment card scheme. The impact assessment shows that a prohibition of interchange fees for debit card transactions would be beneficial for card acceptance, card usage, the development of the single market and generate more benefits to merchants and consumers than a cap set at any higher level. Payment card schemes, issuers, acquirers, processing entities and other technical service providers shall not insert automatic mechanisms, software or devices on the payment instrument or at equipment applied at the point of sale which limit the choice of payment brand or payment application, or both, by the payer or the payee when using a co-badged payment instrument. The acquiring service is provided irrespective of whether the acquirer is holding the funds on behalf of the payee. Such a limitation would also result in a more competitive environment for cards with interchange fees not regulated under this Regulation, as merchants would gain more negotiating power as regards the conditions under which they accept such cards. To avoid this, the ‘net compensation’ of fees paid or received by the issuer, including possible authorisation charges, from or to a payment card scheme, an acquirer or any other intermediary should be considered as the interchange fee. 6. In order to ensure that redress is possible where this Regulation has been incorrectly applied, or where disputes occur between payment services users and payment service providers, Member States should establish adequate and effective out-of-court complaint and redress procedures or take equivalent measures. (9)  Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12). According to the European Commission, the regulation is aimed at addressing the widely varying and excessive hidden interchange fees which are an obstacle to the Single Market and a barrier to innovation. 2. Amendments of the Payment Card Interchange Fee Regulations 2015. Paragraphs 1 and 2 of this Article are without prejudice to the rules on charges, reductions or other steering mechanisms set out in Directive 2007/64/EC and Directive 2011/83/EU. Each acquirer shall offer and charge its payee merchant service charges individually specified for different categories and different brands of payment cards with different interchange fee levels unless payees request the acquirer, in writing, to charge blended merchant service charges. In accordance with the principle of technological neutrality set out in the Digital Agenda for Europe, this Regulation should apply to card-based payment transactions regardless of the environment in which this transaction takes place, including through retail payment instruments and services which can be off-line, on-line or mobile. In order to define the relevant interchange fee caps for domestic debit card transactions, it is appropriate to allow national competent authorities entitled to ensure compliance with this Regulation to collect information regarding the volume and value of all debit card transactions within a payment card scheme or of the debit card transactions pertaining to one or more payment service providers. The caps in this Regulation are based on the so-called ‘Merchant Indifference Test’ developed in economic literature, which identifies the fee level a merchant would be willing to pay if the merchant were to compare the cost of the customer's use of a payment card with those of non-card (cash) payments (taking into account the fee for service paid to acquiring banks, i.e. Any difference in treatment of issuers or acquirers in scheme rules and rules in licensing agreements concerning co-badging of different payment brands or payment applications on a card-based payment instrument shall be objectively justified and non-discriminatory. Specific rules applied by the payment card schemes require the application of the interchange fee of the ‘point of sale’ (country of the merchant) for each payment transaction, on the basis of their territorial licensing policies. The issuer makes payment cards available to the payer, authorises transactions at terminals or their equivalent and may guarantee payment to the acquirer for transactions that are in conformity with the rules of the relevant scheme. Moreover, it is important that Member States ensure an adequate level of disclosure of the relevant information concerning the applicable interchange fee caps. Interchange reimbursement fees Get the latest information Visa uses interchange reimbursement fees as transfer fees between acquiring banks and issuing banks for each Visa card transaction. When entering into a contractual agreement with a payment service provider, the consumer may require two or more different payment brands on a card-based payment instrument provided that such a service is offered by the payment service provider. Therefore the payment service provider paying the interchange fee does not always contract directly with the payee. 3. the merchant service charge and the interchange fee). 1. Interchange & Scheme Fees Download PDF Start Accepting Payments Today We can help you integrate easier payments that fit with what your business needs and what your customers want. 5. Member States shall notify those provisions to the Commission by 9 June 2016 and shall notify without delay of any subsequent amendment affecting them. This Regulation does not apply to services based on specific payment instruments that can be used only in a limited way, that meet one of the following conditions: instruments allowing the holder to acquire goods or services only in the premises of the issuer or within a limited network of service providers under direct commercial agreement with a professional issuer; instruments which can be used only to acquire a very limited range of goods or services; instruments valid only in a single Member State provided at the request of an undertaking or a public sector entity and regulated by a national or regional public authority for specific social or tax purposes to acquire specific goods or services from suppliers having a commercial agreement with the issuer. Payment card schemes shall allow for the possibility that authorisation and clearing messages of single card-based payment transactions be separated and processed by different processing entities. Scope of Regulation. For the purposes of the application of the caps referred to in Articles 3 and 4, any agreed remuneration, including net compensation, with an equivalent object or effect of the interchange fee, received by an issuer from the payment card scheme, acquirer or any other intermediary in relation to payment transactions or related activities shall be treated as part of the interchange fee. By contrast, the average interchange fee per exempt transaction was considerably higher in 2018 for transactions processed over dual-message networks than for those processed over single-message networks: $0.54 and $0.25, respectively. Payees and payers should have the means to identify the different categories of cards. A separation of scheme and infrastructure should allow all processors to compete for customers of the schemes. EuroCommerce today released a study by retail payments consultancy CMSPI and antitrust and economics advisers Zephyre on the rise since the adoption of the EU Interchange Fee Regulation (IFR) in the fees paid by merchants accepting card payments. By derogation from paragraph 1, until 9 December 2016, Member States may define a share of no more than 30 % of the domestic payment transactions referred to in paragraph 1 of this Article that are considered to be equivalent to credit card transactions to which the interchange fee cap set in Article 4 shall apply. As a consequence, payment card schemes and payment service providers should be obliged to provide relevant data to national competent authorities as specified by those authorities and in accordance with the time limits set by them. Regulation of Debit Interchange Fees Congressional Research Service Summary The United States has seen continued growth of electronic card payments (and a simultaneous decrease in check payments). The Treasury gave card schemes the option to apply a weighted average interchange fee to UK consumer debit card transactions. (8)  Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (OJ L 267, 10.10.2009, p. 7). To find out more about the IFR, read the European Commission’s policy brief. If you have a complaint about a breach of the IFR, you may submit it to us. They shall notify the Commission without delay of any subsequent change concerning those bodies. Having regard to the opinion of the European Economic and Social Committee (2). Member States shall require the competent authorities to monitor effectively compliance with this Regulation, including to counter attempts by the payment service providers to circumvent this Regulation, and take all necessary measures to ensure such compliance. Such national measures would be likely to lead to significant barriers to the completion of the internal market in the area of card-based payments and internet and mobile payments based on cards and would therefore hinder the freedom to provide services. Interchange fees are a main part of the fees charged to merchants by acquiring payment service providers for every card-based payment transaction. If merchants can choose an acquirer outside their own Member State (‘cross-border acquiring’), which will be facilitated by the imposition of the same maximum level of both domestic and cross-border interchange fees for acquired transactions and the prohibition of territorial licensing, it should be possible to provide the necessary legal clarity and to prevent distortions of competition between payment card schemes. First of all, the capping of interchange fees should result in lower fees charged by banks to retailers for processing card payments. The existing administrative decisions in some Member States vary significantly. Payments, incentives and fees considered could be direct (i.e. Here are the instructions of how to enable JavaScript in your browser. 3. Regulation II (Debit Card Interchange Fees and Routing) establishes standards for assessing whether a debit card interchange fee received by a debit card issuer for an electronic debit transaction is reasonable and proportional to the costs incurred … (7)  Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (OJ L 304, 22.11.2011, p. 64). The Interchange Fee Regulation (IFR) sets a requirement for card schemes to separate their processing activities by making them independent in terms of accounting, organisation and … Having regard to the proposal from the European Commission. Payment service providers shall not offer or request a per transaction interchange fee of more than 0,3 % of the value of the transaction for any credit card transaction. Since the objectives of this Regulation to lay down uniform requirements for card-based payment transactions and internet and mobile payments based on cards cannot be sufficiently achieved by the Member States, but can rather, by reason of its scale, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. Any rule in licensing agreements, in scheme rules applied by payment card schemes and in agreements entered into between card acquirers and payees preventing payees from steering consumers to the use of any payment instrument preferred by the payee shall be prohibited. Interchange fees are usually applied between the card-acquiring payment service providers and the card-issuing payment service providers belonging to a certain payment card scheme. For those purposes, Member States shall designate existing bodies, where appropriate, or establish new bodies. Merchants in turn incorporate those card costs, like all their other costs, in the general prices of goods and services. Visa sent a document that outlined the proposal to banks. The Durbin amendment also known as Regulation II is a provision of United States federal law, 15 U.S.C. When a three party payment card scheme licenses other payment service providers for the issuance of card-based payment instruments or the acquiring of card-based payment transactions, or both, or issues card-based payment instruments with a co-branding partner or through an agent, it is considered to be a four party payment card scheme; ‘payment instrument’ means any personalised device(s) and/or set of procedures agreed between the payment service user and the payment service provider and used in order to initiate a payment order; ‘card-based payment instrument’ means any payment instrument, including a card, mobile phone, computer or any other technological device containing the appropriate payment application which enables the payer to initiate a card-based payment transaction which is not a credit transfer or a direct debit as defined by Article 2 of Regulation (EU) No 260/2012; ‘payment application’ means computer software or equivalent loaded on a device enabling card-based payment transactions to be initiated and allowing the payer to issue payment orders; ‘payment account’ means an account held in the name of one or more payment service users which is used for the execution of payment transactions, including through a specific account for electronic money as defined in point 2 of Article 2 of Directive 2009/110/EC of the European Parliament and of the Council (8); ‘payment order’ means any instruction by a payer to its payment service provider requesting the execution of a payment transaction; ‘payment service provider’ means any natural or legal person authorised to provide the payment services listed in the Annex to Directive 2007/64/EC or recognised as an electronic money issuer in accordance with Article 1(1) of Directive 2009/110/EC. Payees shall retain the option of installing automatic mechanisms in the equipment used at the point of sale which make a priority selection of a particular payment brand or payment application but payees shall not prevent the payer from overriding such an automatic priority selection made by the payee in its equipment for the categories of cards or related payment instruments accepted by the payee. Fragmentation of the internal market is detrimental to competitiveness, growth and job creation within the Union. 2. As a consequence of unilateral undertakings and commitments accepted in the framework of competition proceedings, many cross-border card-based payment transactions in the Union are already carried out respecting the maximum interchange fees. The IFR caps interchange fees on UK consumer debit and credit card transactions (except American Express cards). Separation of payment card scheme and processing entities. Moreover, it would avoid negative effects resulting from a higher cap in those national schemes that have very low or zero interchange fees for debit transactions due to cross-border expansion or new market entrants increasing fee levels to the level of the cap. Therefore, during a reasonable transition period, in relation to domestic debit card transactions, Member States should be able to apply to all domestic debit card transactions within each payment card scheme a weighted average interchange fee of no more than the 0,2 % of the annual average transaction value of all domestic debit card transactions within each payment card scheme. Such information shall be displayed prominently at the entrance of the shop and at the till. The suit was filed due to price fixing and other allegedly anti-competitive trade practices in the credit card industry. may steer consumers towards the use of payment instruments, thereby generating high fees for issuers. These Regulations comply with the obligations to designate competent authorities, lay down rules on penalties and take measures for the settlement of disputes under Articles 13 to 15 of Regulation (EU) 2015/751 of the European Parliament and of the Council of 29th April 2015 on interchange fees for card-based payment transactions (OJ L 123, 19.5.2013, p.1.) A clear distinction between consumer and commercial cards should be ensured by the payment service providers both on a technical and on a commercial basis. Choice and availability of payment methods, Access to cash during Covid-19: identifying and managing temporary gaps in provision, Update on our work supporting cash access during the COVID-19 pandemic, Market review into the supply of card-acquiring services, Getting the right outcomes for the victims of APP scams, Infographic - Our work protecting people from Authorised Push Payment (APP) scams, Payment Card Interchange Fee Regulations 2015, 12 Endeavour Square, Stratford, London E20 1JN. Intermediaries providing part of the acquiring services but without direct contractual relationship with payees should nevertheless be covered in the definition of acquirer under this Regulation. In order to ensure that competition between brands is effective, it is important that the choice of payment application be made by users, not imposed by the upstream market, comprising payment card schemes, payment service providers or processors. Cards and other electronic payments can be used in a more versatile manner, including possibilities to pay online in order to take advantage of the internal market and e-commerce, whilst electronic payments also provide merchants with potentially secure payments. It is in the interest of the consumer that for the same category of cards the payees cannot discriminate between issuers or cardholders, and payment card schemes and payment service providers can impose such an obligation on them. The application of existing legislation by the Commission and national competition authorities has not been able to redress this situation. From 9 December 2015, European regulation on interchange fees (Regulation (EU) 2015/751 of the European Parliament and of the European Council of 29 April 2015 on interchange fees for card-based transactions, “the IFR”) imposes interchange fee caps on most product types within the European Economic Area (EEA). In order to facilitate the smooth functioning of an internal market for card-based payments and internet and mobile payments based on cards, to the benefit of consumers and merchants, this Regulation should apply to cross-border and domestic issuing and acquiring of card-based payment transactions. 0300 456 3677 The assessment shall, in particular, consider: the level of competition among payment card providers and payment card schemes; the effects on costs for the payer and the payee; the levels of merchant pass-through of the reduction in interchange fee levels; the technical requirements and their implications for all the parties involved; the effects of co-badging on user-friendliness, in particular for the elderly and other vulnerable users; the effect on the market of the exclusion of commercial cards from Chapter II, comparing the situation in those Member States where surcharging is prohibited with those where it is permitted; the effect on the market of the special provisions for interchange fees for domestic debit card transactions; the development of cross-border acquiring and its effect on the single market, comparing the situation for cards with capped fees and cards which are not capped, to consider the possibility of clarifying which interchange fee applies to cross-border acquiring; the application in practice of the rules on separation of payment card scheme and processing, and the need to reconsider legal unbundling; the possible need, depending on the effect of Article 3(1) on the actual value of interchange fees for medium and high value debit card transactions, to revise that paragraph by providing that the cap should be limited to the lower amount of EUR 0,07 or 0,2 % of the value of the transaction. The acquiring service constitutes a chain of operations from the initiation of a card-based payment transaction to the transfer of the funds to the payment account of the payee. An interchange fee is paid from a merchant’s bank (called an acquirer) to a card user’s bank (called an issuer) for most transactions when a card payment is made (except for American Express cards) – for example, when somebody buys groceries from a supermarket using their card. 5. To quote the Interchange Fee Regulation: " The outcome the European Commission expects is that merchants should know, for each transaction, the amount of the [Merchant Service Charge] and the interchange fee and are therefore able to check if the benefit of the regulation has been passed to them." With other credit cards, the cardholder can use a credit facility in order to reimburse part of the amounts due at a later date than specified, together with interest or other costs. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives. The Regulation stipulates that the interchange fee imposed on debit card transactions cannot exceed 0.2% of the value of the transaction while the interchange fee imposed on credit card transactions cannot exceed 0.3% of the value of the transaction. 1. The net compensation or other agreed remuneration is considered to be part of the interchange fee; ‘net compensation’ means the total net amount of payments, rebates or incentives received by an issuer from the payment card scheme, the acquirer or any other intermediary in relation to card-based payment transactions or related activities; ‘merchant service charge’ means a fee paid by the payee to the acquirer in relation to card-based payment transactions; ‘payee’ means a natural or legal person who is the intended recipient of funds which have been the subject of a payment transaction; ‘payer’ means a natural or legal person who holds a payment account and allows a payment order from that payment account, or, where there is no payment account, a natural or legal person who gives a payment order; ‘payment card’ means a category of payment instrument that enables the payer to initiate a debit or credit card transaction; ‘payment card scheme’ means a single set of rules, practices, standards and/or implementation guidelines for the execution of card-based payment transactions and which is separated from any infrastructure or payment system that supports its operation, and includes any specific decision-making body, organisation or entity accountable for the functioning of the scheme; ‘four party payment card scheme’ means a payment card scheme in which card-based payment transactions are made from the payment account of a payer to the payment account of a payee through the intermediation of the scheme, an issuer (on the payer's side) and an acquirer (on the payee's side); ‘three party payment card scheme’ means a payment card scheme in which the scheme itself provides acquiring and issuing services and card-based payment transactions are made from the payment account of a payer to the payment account of a payee within the scheme. 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