Regulation II (Debit Card Interchange Fees and Routing)

Interchange Fee Standards: Small Issuer Exemption Average Interchange Fee by Network Reports and Data Collections

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 by the issuer with respect to the transaction. The standards allow for a fraud-prevention adjustment to an issuer's debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the rule. Certain small debit card issuers, government-administered payment programs and reloadable general-use prepaid cards are exempt from the interchange fee limitations.

The rule also prohibits all issuers and networks from restricting the number of networks over which debit transactions may be processed to less than two unaffiliated networks, and from inhibiting a merchant's ability to direct the routing of a debit transaction over any network that the issuer has enabled to process it.

The requirements of Regulation II are enforced by an institution's Federal functional regulator. For example, the Office of the Comptroller of the Currency is responsible with respect to national banks and federal thrifts; the Federal Reserve Board is responsible with respect to state member banks; the Federal Deposit Insurance Corporation is responsible with respect to state nonmember banks and state-chartered thrifts; and the National Credit Union Administration is responsible for enforcing the rule with respect to federally insured credit unions. The Federal Trade Commission is responsible for enforcement with respect to other entities not covered by the above regulators.