August 10, 2015
Federal Reserve Board clarifies Regulation II regarding the inclusion of transaction-monitoring costs
For release at 2:00 p.m. EDT
The Federal Reserve Board on Monday clarified Regulation II (Debit Card Interchange Fees and Routing) regarding the inclusion of transaction-monitoring costs in the interchange fee standard.
Regulation II implements, among other things, standards for assessing whether interchange transaction fees for electronic debit transactions are reasonable and proportional to the cost incurred by the issuer, as required by section 920 of the Electronic Fund Transfer Act (EFTA). On March 21, 2014, the Court of Appeals for the D.C. Circuit reversed an earlier decision of the District Court and largely upheld Regulation II against a challenge to the rule by merchant groups. The court found that one aspect of the rule--the Board's inclusion of transaction-monitoring costs in the interchange fee standard--required further explanation.
The attached Federal Register notice provides the additional justification required by the Court of Appeals' opinion.
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