Federal Reserve Board Report Finds Interchange Fee Exemption Benefiting Small Issuers

Federal Reserve Debit Cards

On May 23, the Federal Reserve Board issued a report showing that the exemption designed to protect small debit card issuers from interchange fee standards applied to large issuers is working as intended. The report indicates that depository institutions with consolidated assets of less than $10 billion, which are exempt from the interchange fee standard in Regulation II, received fee revenue of 43 cents per transaction in 2012 – roughly the same as the average received before Regulation II took effect. While the Dodd-Frank Act exempted small issuers from the interchange fee standard set in the regulation, it did not provide an exemption from the statute’s prohibition on network exclusivity. As a result, Regulation II requires every debit card issuer, regardless of size, to have at least two unaffiliated networks on every debit card. According to the report, most small issuers that responded to a survey about the effect of the network exclusivity provisions of the rule indicated that significant compliance costs were not incurred.