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Federal Register / Vol. 86, No. 91 / Thursday, May 13, 2021 / Proposed Rules future to capture means of access that do not yet exist and that would still be captured by Regulation II if they were to be developed. The proposed revisions further clarify that, for any means of access that carries the debit card information, there must be at least two unaffiliated payment card networks enabled by the issuer, as required by the network exclusivity provisions in 235.7a. For example, if the issuer provides the cardholder with a fob in addition to a plastic card, the fob must allow transactions to be processed over at least two unaffiliated payment card networks.
IV. Regulatory Analysis A. EFTA 904a Section 904a2 of the EFTA requires the Board, in prescribing regulations to carry out the purposes of EFTA section 920, to prepare an analysis of economic impact which considers the costs and benefits to financial institutions, consumers, and other users of electronic fund transfers. The analysis must address the extent to which additional paperwork would be required, the effect upon competition in the provision of electronic fund transfer services among large and small financial institutions, and the availability of such services to different classes of consumers, particularly low income consumers.
The proposed amendments clarify Regulation IIs existing requirements by emphasizing the role of the issuer in ensuring that at least two unaffiliated networks have been enabled in compliance with the regulations network exclusivity provisions, and by clarifying that those provisions apply to card-not-present transactions. Therefore, the proposed amendments do not impose additional paperwork requirements related to reporting to the Board. With respect to the competitive effects of the proposed amendments, the proposed amendments clarify that at least two networks must be enabled for card-not-present transactions, allowing merchants or their acquirer to choose among multiple competing networks to process the transaction. Because the proposed amendments apply to all issuers regardless of their size, they are unlikely to have an effect upon competition among large and small financial institutions in the provision of electronic fund transfer services. With respect to the availability of services to different classes of consumers, particularly low-income consumers, consumers are typically unaware of the networks used to process many debit card transactions today, including cardnot-present transactions where at least
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two unaffiliated networks are already available. Nevertheless, the effect of the proposed rule on the availability of services to consumers will likely depend on various factors, including each consumers payment and purchase behavior, as well as market responses to the increased availability of multiple networks for card-not-present transactions. Ultimately, the costs and benefits of the proposed revisions are uncertain and will depend on the adjustments that different parties may make and the market response to the proposed rule.
In addition, EFTA section 904a3
provides that in prescribing regulations to carry out the purposes of EFTA
section 920, to the extent practicable, the Board shall demonstrate that the consumer protections of the proposed regulations outweigh the compliance costs imposed upon consumers and financial institutions. The proposed rule does not relate to consumer protections, and therefore the Board cannot, at this time, determine whether the benefits to consumers exceed the possible costs to financial institutions. Additionally, the overall effects of the proposed rule on financial institutions and on consumers are dependent on a variety of factors, and the Board cannot predict the market response to the proposed rule.
The Board welcomes comment on the impact of the proposed amendments on the various participants in the debit card market and on consumers, as well as on all aspects of the analysis under EFTA section 904a.
B. Paperwork Reduction Act In accordance with the Paperwork Reduction Act PRA of 1995 44 U.S.C.
3506; 5 CFR part 1320, Appendix A.1, the Board may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a valid Office of Management and Budget OMB control number. The Board reviewed the proposed rule under the authority delegated to the Board by the OMB and determined that it contains no collections of information under the PRA.20 Accordingly, there is no paperwork burden associated with the proposed rule.
C. Regulatory Flexibility Act In accordance with section 4 of the Regulatory Flexibility Act RFA, 5
U.S.C. 601 et seq., the Board is publishing an initial regulatory flexibility analysis for the proposed rule. The RFA generally requires an agency to assess the impact a rule is 20 See
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expected to have on small entities. The RFA requires an agency either to provide a regulatory flexibility analysis or to certify that the proposed rule will not have a significant economic impact on a substantial number of small entities.
Two of the requirements of an initial regulatory flexibility analysis 21a description of the reasons the action is being considered and a statement of the objectives of, and legal basis for, the proposed ruleare contained in the information above. Although EFTA
section 920 exempts all issuers that, together with affiliates, have assets of less than $10 billion from the limitations on interchange transaction fees, the prohibition on network exclusivity and the prohibition on routing restrictions apply to all issuers, including small issuers. There are no reporting provisions or relevant federal rules that duplicate, overlap, or conflict with the proposed rule, and the Board is not aware of any significant alternatives to the final rule that would reduce the economic impact on Boardregulated small entities.
As discussed above in this SUPPLEMENTARY INFORMATION section, the Board is proposing to amend a particular section of the Regulation II, as well as revise portions of the commentary to the regulation, to emphasize the role of the issuer in ensuring that at least two unaffiliated networks have been enabled in compliance with the regulations network exclusivity provisions and 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. The proposed amendments would clarify existing requirements that already apply to any person that chooses to authorize the use of a debit card to perform an electronic debit transaction, regardless of that issuers size. The Board does not intend these amendments to be an expansion of coverage to any additional small entities that were not already subject to the rule.
Another requirement for the initial regulatory flexibility analysis is a description of, and where feasible, an estimate of, the number of small entities to which the proposed rule will apply.
Under regulations issued by the Small Business Administration, a small entity includes a depository institution, bank holding company, savings and loan holding company, and credit card issuer with total assets of $600 million or less and trust companies with total annual 21 5

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