Competition between payment card schemes to convince payment service providers to issue their cards leads to higher rather than lower interchange fees on the market, in contrast with the usual price-disciplining effect of competition in a market economy. Payees and payers should have the means to identify the different categories of cards. 3. Any territorial restrictions within the Union or rules with an equivalent effect in licensing agreements or in payment card scheme rules for issuing payment cards or acquiring card-based payment transactions shall be prohibited. 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. 3. 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. To find out more about the IFR, read the European Commission’s policy brief. 5. (“the interchange fee regulation”). 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 result, consumers and merchants face restricted choice, higher prices and lower quality of payment services, while their ability to use pan-Union payment solutions is also restricted. 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.) 5. 4. Moreover, it is important that Member States ensure an adequate level of disclosure of the relevant information concerning the applicable interchange fee caps. Secure, efficient, competitive and innovative electronic payments are crucial if consumers, merchants and companies are to enjoy the full benefits of the internal market, especially as the world moves towards e-commerce. It was passed as part of the Dodd-Frank financial reform legislation in 2010, as a last-minute addition by Illinois Senator Richard Durbin, after whom the amendment is named. Interchange fees for consumer credit card transactions. 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 … 4. Some Member States have issued or are preparing legislation to regulate directly or indirectly interchange fees and covering a number of issues, including caps on interchange fees at various levels, merchant fees, the ‘Honour All Cards’ rule and steering measures. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Until 9 December 2020, in relation to domestic debit card transactions, Member States may allow payment service providers to apply a weighted average interchange fee of no more than the equivalent of 0,2 % of the annual average transaction value of all domestic debit card transactions within each payment card scheme. 9. 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 European Banking Authority (EBA) may, after consulting an advisory panel as referred to in Article 41 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (9), develop draft regulatory technical standards establishing the requirements to be complied with by payment card schemes and processing entities to ensure the application of point (a) of paragraph 1 of this Article. 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. 2. THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION. On the basis of the separation of scheme and infrastructure, card schemes and processing entities should be independent in terms of accounting, organisation and decision-making process. 3. In good time before the contract is signed, the payment service provider shall provide the consumer with clear and objective information on all the payment brands available and their characteristics, including their functionality, cost and security. contactus@psr.org.uk, Interchange Fee Regulation - what it is, what it does, and our role. 2. 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. Payments, incentives and fees considered could be direct (i.e. 4. Contact us | Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114(1) thereof. For the purposes of this Regulation, in relation to domestic payment transactions that are not distinguishable as debit or credit card transactions by the payment card scheme, the provisions on debit cards or debit card transactions are applied. 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. (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). Any other information enabling the competent authorities to verify compliance with the provisions of this Chapter shall be sent to the competent authorities upon their written request and within the deadline set by them. Member States shall notify the Commission of those competent authorities by 9 June 2016. If you have a complaint about a breach of the IFR, you may submit it to us. If a card scheme does this, the interchange fee on an individual transaction may be more or less than 0.2%. transactions with payment cards issued by three party payment card schemes. Payment card schemes shall not impose reporting requirements, obligations to pay fees or similar obligations with the same object or effect on card issuing and acquiring payment service providers for transactions carried out with any device on which their payment brand is present in relation to transactions for which their scheme is not used. allow payment service providers to apply a per transaction interchange fee of no more than EUR 0,05, or, in the Member States whose currency is not the euro, the corresponding value in the national currency on 8 June 2015, which shall be revised every five years or whenever there is a significant variation in exchange rates. (3)  Position of the European Parliament of 10 March 2015 (not yet published in the Official Journal) and Decision of the Council of 20 April 2015. 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. Paragraph 1 shall not apply to consumer card-based payment instruments of the same brand and of the same category of prepaid card, debit card or credit card subject to interchange fees under Chapter II of this Regulation. The EU rules impose a cap of 0.2% of the transaction value for consumer debit cards, and 0.3% for credit cards. Any payment card scheme rules and rules in licensing agreements or measures of equivalent effect that hinder or prevent an issuer from co-badging two or more different payment brands or payment applications on a card-based payment instrument shall be prohibited. Visa uses these fees to balance and grow the payment system for the benefit of all participants. through a third party) between the issuer and the acquirer involved in a card-based payment transaction. 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 informing payers about interchange fees and merchant service charges shall be prohibited. 3. It should also be possible to apply such a flat rate in combination with a percentage rate, provided that the sum of such interchange fees does not exceed the specified percentage of the total annual transaction value at domestic level within each payment card scheme. 0300 456 3677 American Express, which operates a unique business model with fees other than interchange fees, informally committed to maintaining its current business model. (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). Payment instruments entail different costs to the payee, with certain instruments being more expensive than others. In order to enhance effective market functioning in the non-regulated parts of the sector and to limit the transfer of business from the regulated to the non-regulated parts of the sector, it is necessary to adopt a series of measures, including the separation of scheme and infrastructure, the steering of the payer by the payee and the selective acceptance of payment instruments by the payee. Excessive merchant fees might otherwise arise due to the collective interchange fee arrangements, as merchants are reluctant to turn down costly payment instruments for fear of losing business. For domestic debit card transactions Member States may either: define a per transaction percentage interchange fee cap lower than the one provided for in paragraph 1 and may impose a fixed maximum fee amount as a limit on the fee amount resulting from the applicable percentage rate; or. As the cost of processing is a significant part of the total cost of card acceptance, it is important for this part of the value chain to be opened to effective competition. 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." It shall apply from 8 June 2015, with the exception of Articles 3, 4, 6 and 12, which shall apply from 9 December 2015, and of Articles 7, 8, 9 and 10, which shall apply from 9 June 2016. 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. In situations where the payee steers the payer towards the use of a specific payment instrument, no charges should be requested by the payee from the payer for the use of payment instruments of which interchange fees are regulated within the scope of this Regulation, as in such situations the advantages of surcharging become limited while creating complexity in the market. Payment card schemes and processing entities: shall be independent in terms of accounting, organisation and decision-making processes; shall not present prices for payment card scheme and processing activities in a bundled manner and shall not cross-subsidise such activities; shall not discriminate in any way between their subsidiaries or shareholders on the one hand and users of payment card schemes and other contractual partners on the other hand and shall not in particular make the provision of any service they offer conditional in any way on the acceptance by their contractual partner of any other service they offer. The Reg ulation on Interchange Fees for Card-based payment transactions entered into force in June 2015. Issuers shall ensure that their payment instruments are electronically identifiable and, in the case of newly issued card-based payment instruments, also visibly identifiable, enabling payees and payers to unequivocally identify which brands and categories of prepaid cards, debit cards, credit cards or commercial cards are chosen by the payer. Member States may define a lower weighted average interchange fee cap applicable to all domestic debit card transactions. 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. In addition to a consistent application of the competition rules to interchange fees, regulating such fees would improve the functioning of the internal market and contribute to reducing transaction costs for consumers. 1. Our guidance on our approach to monitoring and enforcing the IFR provides more information on the transactions that are not covered by the interchange fee caps. Member States may designate one or more competent authorities. Member States shall lay down rules on penalties applicable to infringements of this Regulation and shall take all measures necessary to ensure that they are applied. A removal of the ‘Honour all Products’ element of the ‘Honour all Cards’ rule would allow merchants to limit the choice of payment cards they offer to low(er) cost payment cards only, which would also benefit consumers through reduced merchants' costs. Here are the instructions of how to enable JavaScript in your browser. 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. For example, the credit card cap could be applied to the defined share of the total value of the transactions for merchants or acquirers. Here, too, a flat fee or a percentage fee or a combination of the two can be applied provided that the weighted average maximum cap is respected. 1. 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. Card-based payment transactions exclude transactions based on other kinds of payment services; ‘cross-border payment transaction’ means a card-based payment transaction where the issuer and the acquirer are located in different Member States or where the card-based payment instrument is issued by an issuer located in a Member State different from that of the point of sale; ‘domestic payment transaction’ means any card-based payment transaction which is not a cross-border payment transaction; ‘interchange fee’ means a fee paid for each transaction directly or indirectly (i.e. The EC MIF Regulation (also called the Interchange Fee Regulation / IFR) refers to the regulation of the European Parliament and of the Council on multilateral interchange fees (MIFs) for card-based payment transactions. 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. Payment card schemes and payment service providers shall not apply any rule that obliges payees accepting a card-based payment instrument issued by one issuer also to accept other card-based payment instruments issued within the framework of the same payment card scheme. The ‘Honour all Products’ element is essentially a tying practice that has the effect of tying acceptance of low fee cards to the acceptance of high fee cards. Therefore, by way of exception and during a transition period of 18 months after the entry into force of this Regulation, Member States should be able to define a maximum share of domestic ‘universal cards’ payment transactions which are considered as being equivalent to credit card transactions. 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. 6. In the case of distance sales, this information shall be displayed on the payee's website or other applicable electronic or mobile medium. Visa sent a document that outlined the proposal to banks. From: HM Treasury. Our powers to monitor and enforce the IFR are set out in the Payment Card Interchange Fee Regulations 2015. A payment service provider can be an issuer or an acquirer or both; ‘payment service user’ means a natural or legal person making use of a payment service in the capacity of either payer or payee, or both; ‘payment transaction’ means an action, initiated by the payer or on its behalf or by the payee of transferring funds, irrespective of any underlying obligations between the payer and the payee; ‘processing’ means the performance of payment transaction processing services in terms of the actions required for the handling of a payment instruction between the acquirer and the issuer; ‘processing entity’ means any natural or legal person providing payment transaction processing services; ‘point of sale’ means the address of the physical premises of the merchant at which the payment transaction is initiated. Interchange Fee Regulation Phase 3 – Effective Thursday 9th June, 2016 Date: May, 2016 Contact: Peter Robinson, liberticonsulting@gmail.com REGULATION ON INTERCHANGE FEES FOR CARD-BASED PAYMENT TRANSACTIONS On 9th June, the last set of rules under the Interchange Fee Regulation will enter into force, 4. It is necessary that any limitation on the use of a given brand be announced by the payee to the payer at the same time and under the same conditions as the information that a given brand is accepted. 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. Any territorial discrimination in processing rules operated by payment card schemes shall be prohibited. Such discriminatory practises contribute to market fragmentation, negatively impact market entry by new players and prevent pan-Union players from emerging, hence hindering the completion of the internal market in the area of card-based payments and internet and mobile payments based on cards, to the detriment of merchants, companies and consumers. Having regard to the proposal from the European Commission. Nevertheless, as shown in the impact assessment, in certain Member States interchange fees have developed so as to allow consumers to benefit from efficient debit card markets in terms of card acceptance and card usage with lower interchange fees than the merchant indifference level. Eliminating direct and indirect obstacles to the proper functioning and completion of an integrated market for electronic payments, with no distinction between national and cross-border payments, is necessary for the proper functioning of the internal market. 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. Member States shall designate competent authorities that are empowered to ensure enforcement of this Regulation and that are granted investigation and enforcement powers. In November 2014, Visa and Mastercard separately committed to voluntarily reduce their interchange fees, which businesses are charged for the use of their cards. Experience has shown that those levels are proportionate, as they do not call into question the operation of international card schemes and payment service providers. 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. The European Commission’s intention with the IFR caps is to redistribute the revenue from issuer banks to merchants and on to consumers. Even if merchants are aware of the different costs, the scheme rules often prevent them from acting to reduce the fees. Regulation (EU) No 260/2012 of the European Parliament and of the Council (6) provided the rules for the functioning of credit transfers and direct debits in euro in the internal market but excluded card-based payment transactions from its scope. In addition, payment card schemes shall not adopt or apply business rules that restrict interoperability among processing entities within the Union. It should not prevent Member States from maintaining or introducing lower caps or measures of equivalent object or effect through national legislation. The designated competent authorities referred to in paragraph 1 shall have adequate resources for the performance of their duties. 1. A flat rate may also promote the use of card-based payments of small value amounts (‘micropayments’). PART 3 Amendments of Regulation (EU) 2015/751. This Regulation should cover all transactions where the payer's payment service provider and the payee's payment service provider are located in the Union. 3. 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. This Regulation complies with the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, notably the right to an effective remedy or to a fair trial, the freedom to conduct a business, consumer protection and has to be applied in accordance with those rights and principles. As the lead competent authority for the IFR in the UK, we have published guidance on our approach to monitoring and enforcing the IFR. 2. § 1693o-2, that requires the Federal Reserve to limit fees charged to retailers for debit card processing. EBA shall submit those draft regulatory technical standards to the Commission by 9 December 2015. 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. They shall notify the Commission without delay of any subsequent change concerning those bodies. For the purposes of this Regulation, the following definitions shall apply: ‘acquirer’ means a payment service provider contracting with a payee to accept and process card-based payment transactions, which result in a transfer of funds to the payee; ‘issuer’ means a payment service provider contracting to provide a payer with a payment instrument to initiate and process the payer's card-based payment transactions; ‘consumer’ means a natural person who, in payment service contracts covered by this Regulation, is acting for purposes other than the trade, business or profession of that person; ‘debit card transaction’ means a card-based payment transaction, including those with prepaid cards that is not a credit card transaction; ‘credit card transaction’ means a card-based payment transaction where the amount of the transaction is debited in full or in part at a pre agreed specific calendar month date to the payer, in line with a prearranged credit facility, with or without interest; ‘commercial card’ means any card-based payment instrument issued to undertakings or public sector entities or self-employed natural persons which is limited in use for business expenses where the payments made with such cards are charged directly to the account of the undertaking or public sector entity or self-employed natural person; ‘card-based payment transaction’ means a service based on a payment card scheme's infrastructure and business rules to make a payment transaction by means of any card, telecommunication, digital or IT device or software if this results in a debit or a credit card transaction. 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. 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. At the same time, a series of incentivising practices applied by issuers (such as travel vouchers, bonuses, rebates, charge backs, free insurances, etc.) Therefore the ‘Honour all Issuers’ element of the ‘Honour all Cards’ rule is a justifiable rule within a payment card scheme, since it prevents payees from discriminating between individual banks which have issued a card. 2. Paragraph 1 is without prejudice to the possibility for payment card schemes and payment service providers to provide that cards may not be refused on the basis of the identity of the issuer or of the cardholder. The application of existing legislation by the Commission and national competition authorities has not been able to redress this situation. 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. MIFs are inter-bank fees typically agreed on a collective basis between the acquirers and issuers of a particular card scheme. 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