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Proposed Rules
Federal Register Vol. 86, No. 91
Thursday, May 13, 2021

This section of the FEDERAL REGISTER
contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules.

FEDERAL RESERVE SYSTEM
12 CFR Part 235
Regulation II; Docket No. R1748
RIN 7100AG15

Debit Card Interchange Fees and Routing Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed rulemaking.
AGENCY:

The Board of Governors Board is seeking comment on a proposal to amend Regulation II to clarify that the requirement that each debit card transaction must be able to be processed on at least two unaffiliated payment card networks applies to cardnot-present transactions, clarify the requirements that Regulation II imposes on debit card issuers to ensure that at least two unaffiliated payment card networks have been enabled for debit card transactions, and standardize and clarify the use of certain terminology.
DATES: Comments must be received on or before July 12, 2021.
ADDRESSES: You may submit comments, identified by Docket No. R1748, RIN
7100AG15, by any of the following methods:
Agency Website: http
www.federalreserve.gov. Follow the instructions for submitting comments at http www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
Email: regs.comments@
federalreserve.gov. Include docket number in the subject line of the message.
Fax: 202 4523819 or 202 452
3102.
Mail: Ann E. Misback, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW, Washington, DC 20551.
All public comments are available from the Boards website at http
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted, unless modified for technical reasons or SUMMARY:

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to remove personally identifiable information at the commenters request.
Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room 146, 1709 New York Avenue NW, Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Jess Cheng, Senior Counsel 2024522309, Legal Division; or Krzysztof Wozniak, Manager 2024523878, Elena Falcettoni, Economist 2024522528, or Larkin Turman, Financial Institution and Policy Analyst 2024522388, Division of Reserve Bank Operations and Payment Systems. Users of Telecommunication Device for Deaf TDD only, call 202 2634869.
SUPPLEMENTARY INFORMATION:
I. Introduction A. Statutory Authority The Dodd-Frank Wall Street Reform and Consumer Protection Act the Dodd-Frank Act was enacted on July 21, 2010.1 Section 1075 of the DoddFrank Act amends the Electronic Fund Transfer Act EFTA 15 U.S.C. 1693 et seq. to add a new section 920 regarding interchange transaction fees for electronic debit transactions and rules for payment card transactions.2
EFTA section 920b1 directs the Board to prescribe regulations that limit restrictions that issuers and payment card networks may place on the processing of an electronic debit transaction.3 An electronic debit transaction typically involves at least five parties: i A cardholder, ii the entity that issued the debit card to the 1 Public
Law 111203, 124 Stat. 1376 2010.
section 920 is codified as 15 U.S.C.
1693o2. Electronic debit transaction or debit card transaction is defined in EFTA section 920c5 as a transaction in which a person uses a debit card.
3 EFTA section 920c9 defines issuer as any person who issues a debit card, or credit card, or the agent of such person with respect to such card.
EFTA section 920c11 defines payment card network as an entity that directly, or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software that route information and data to conduct debit card or credit card transaction authorization, clearance, and settlement, and that a person uses in order to accept as a form of payment a brand of debit card, credit card or other device that may be used to carry out debit or credit transactions. 15
U.S.C. 1693o2.
2 EFTA

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cardholder the issuer, iii a merchant, iv the merchants depository institution the acquirer, and v a payment card network.4 EFTA section 920b1 contains two provisions with respect to issuers and payment card networks.
First, EFTA section 920b1A
directs the Board to prescribe regulations to prohibit an issuer or payment card network from imposing exclusivity arrangements with respect to the payment card networks over which an electronic debit transaction may be processed. In particular, the statute directs the Board to prescribe regulations that forbid issuers and payment card networks from restricting the number of such networks to fewer than two unaffiliated networks prohibition on network exclusivity.
Absent this prohibition on network exclusivity, an issuer could enable only a single payment card network, or only two affiliated networks, to process a debit card transaction, thereby foreclosing the ability of the merchant or its acquirer to choose among multiple competing networks to process the transaction.
Second, EFTA section 920b1B
directs the Board to prescribe regulations to prohibit an issuer or payment card network from restricting the ability of a merchant or its acquirer to choose among the networks enabled on a card when deciding how to route a debit card transaction.5 Specifically, the statute directs the Board to prescribe regulations that forbid issuers and payment card networks from directly or indirectly inhibiting any person that accepts debit cards for payment from directing the routing of an electronic debit transaction over any network that may process that transaction prohibition on routing restrictions.
Absent this prohibition on routing 4 The issuer provides the cardholder with a debit card that is enabled to process transactions over various payment card networks. The cardholder can initiate a debit card transaction at a merchant that accepts the networks enabled on the cardholders card. To process the transaction, the acquirer routes the transaction over one of the payment card networks available on the card.
5 The merchants choice of network is typically implemented by its acquirer or processor. A
merchant may have preferences over the payment card networks that are available to process a debit card transaction, based on, for example, networks interchange fees or other network fees. The acquirer can incorporate a merchants preferences when determining how to route a transaction, given the available networks.

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