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					                                                              January 5, 2011



Fed Proposes Debit Interchange Fee and
Routing Regulations
Executive Summary

     The Federal Reserve Board (Fed) has issued a proposed rule to regulate debit
      interchange fee income and debit card routing under the Dodd-Frank Act. While
      the Fed has made some efforts to address a few credit union issues, the new
      proposal raises many very serious substantive concerns and is needlessly
      complex.

         o CUNA is strongly opposing the proposal as issued and urges all
           concerned leagues and credit unions to write to the Fed in opposition to
           the proposal.

         o Comments can be made through CUNA’s Operation Comment by clicking
           here. Comments are due to the Fed by February 22, 2011. Please
           share your comments with CUNA as soon as possible; CUNA will be
           working with our Interchange Working Group to develop our detailed letter,
           which will we share with the credit union system. We plan to develop our
           letter well in advance of the comment deadline.

         o CUNA has had ongoing communications with Congress and the Fed on
           interchange. We have written an initial letter to the Fed in opposition,
           which you may access here and has requested a congressional hearing
           on the Dodd-Frank interchange amendment, which is available here.

         o We are also working with the payment card networks to help ensure they
           are doing all they can to develop and maintain two-tiered structures that
           will protect small issuers, including credit unions, from the lower fees that
           will be applied for large issuers.

         o The Act provides an exemption for small issuers with assets under $10
           billion from the interchange fee rate setting limitations that will apply to
           larger issuers, but does not include provisions specifically designed to
           enforce the exemption.
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o This lack of an enforcement mechanism in the statute makes it difficult for
  CUNA, leagues and others to push for the exemption to be enforced by
  the Fed under the new proposal.

o However, even without an express enforcement mechanism, CUNA feels
  strongly that language in the statute should be utilized in the Fed’s rule to
  make the exemption work by ensuring the networks will provide a two-
  tiered structure that accommodates higher interchange fees for small
  issuers, as Congress intended.

o The language in the statute, which amends the Electronic Fund Transfer
  Act, that the Fed should use to make the exemption work is in new
  Section 920(a)(1) of the EFT Act – ―The Board may prescribe
  regulations…to prevent circumvention or evasion‖ of the rate setting
  provisions.

o If the exemption is not enforced, small issuers may very likely be
  subjected to the fees that will be required for large issuers under the
  proposal.

o The fee structure that the Fed developed to limit interchange fees for large
  issuers, that will directly impact the three largest credit unions, is far too
  low – 12 cents per transaction.

o The 12 cent cap excludes a number of reasonable costs and does not
  take into consideration fraud prevention and data security costs. Congress
  specifically directed these costs be considered by the Fed.

o In addition to the rate setting provisions, the Act directs the Fed to regulate
  debit interchange routing and the new prohibition on exclusive
  arrangements between networks and issuers.

o The debit routing and exclusivity provisions will apply to all debit card
  issuers regardless of asset size, — so even if a two-tiered system is
  permitted and works in practice, these provisions may undermine credit
  unions’ interchange income, as discussed further below.

o Under the proposal, the Fed is seeking comments on two alternatives –
  one to require each issuer to participate in an independent signature
  network and independent PIN network and another that would require
  issuers to participate in four independent networks.

o Of the two options proposed, Alternative A would be less burdensome on
  credit unions because it would only require issuers to provide debit cards
  that can be used over two unaffiliated networks.




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          o If Alternative B is adopted, all issuers could face higher network costs.
          o Further, under the routing provisions, small issuers could be further
            disadvantaged if merchants will be able to ―steer‖ transactions toward
            large issuers that must operate under lower debit interchange fees.

      If commenting directly to the Fed, you must refer to Docket No. R-1404.

Please feel free to e-mail your responses to Senior Vice President and Deputy General
Counsel Mary Dunn at mdunn@cuna.com or Counsel for Special Projects Michael
Edwards at medwards@cuna.com. You can also mail them CUNA’s Regulatory
Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, 6th Floor,
Washington, DC 20004. You may access a copy of the proposal at this address:
http://edocket.access.gpo.gov/2010/pdf/2010-32061.pdf

BACKGROUND

Section 1075 of the Dodd-Frank Act added a new Section 920 to the Electronic Fund
Transfer Act (EFTA), which requires the Fed to implement price controls for debit
interchange transaction fees and to issue regulations on debit card transaction routing.
The Fed is calling these rules ―Regulation II.‖
DESCRIPTION OF THE PROPOSED RULE
Small Issuer Exemption
Proposed Regulation II contains an exemption for small issuers (credit unions and
banks with less than $10 billion in assets) as well as for government-issued debit cards
and certain types of prepaid cards; these entities will not directly be required to meet the
rate setting requirements of the rule but will be directly subjected to its routing and
exclusivity provisions, as discussed below. The Fed proposes to have end-of-year
assets of the prior year determine whether a credit union or other issuer falls within the
small issuer exemption.
The Fed is seeking comment on whether the final rule should include a consistent
certification process and reporting period under which an issuer would notify a payment
card network and other parties that it qualifies for the small issuer exemption. Under the
example cited in the proposed rule’s preamble, an issuer would notify a payment card
network within 90 days of the end of the preceding calendar year in order to be eligible
for the exemption going forward. In addition, the Fed seeks comment on whether
payment card networks should develop their own process for determining whether an
issuer is covered by the exemption.
Interchange Rate Regulation for Non-Exempt Institutions
The Fed proposes two possible alternatives for interchange rate setting with respect to
issuers with $10 billion or more in assets.



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―Alternative 1‖ includes the following:

            It would set a maximum possible interchange rate of 12 cents per
              transaction, and a ―safe harbor‖ of 7 cents per transaction.
            How this would work in practice is that an issuer could charge fees that
              cover its documented ―allowable costs‖ (as defined by EFTA Section 920
              and included in the Fed’s proposal) up to 12 cents per transaction but, in
              any case, could always charge at least 7 cents per transaction even if its
              ―allowable costs‖ were less than 7 cents.
            The fees under this alternative could technically be based on a percentage
              value of the transaction but could not be more than 12 cents per
              transaction or the issuer’s ―allowable costs‖ per transaction, whichever is
              less.
            ―Allowable costs‖ generally would be defined under ―Alternative 1‖ to
              include costs related to: (1) receiving and processing requests for
              authorization; (2) receiving and processing presentments and
              representments; (3) initiating receiving and processing chargebacks,
              adjustments, and similar transactions; and (4) transmitting or receiving
              funds for interbank settlement and posting electronic debit transactions to
              cardholder accounts.
            The definition of ―allowable costs‖ would NOT include fees charged by a
              payment card network (because EFTA Section 920 does not limit fees
              charged by a payment card network, only fees that compensate issuers).
            In order to obtain up to 12 cents per transaction fee under Alternative I, an
              issuer would have to determine ―allowable costs‖ for each transaction
              based on the issuer’s ―average variable cost per transaction.‖ This would
              be calculated by adding the allowable costs described above for all
              electronic debit transactions over the reporting period (the prior calendar
              year between October 1 and September 30) and dividing by the number
              of electronic debit transactions for which the issuer received or charged
              an interchange fee in that same period. The issuer’s safety and
              soundness regulator would verify these calculations.
―Alternative 2‖ would set a ―cap‖ whereby the issuer may charge a percentage of the
value of a transaction up to 12 cents per transaction. ―Alternative 2‖ does not contain
the ―allowable costs‖ methodology.
Fraud Prevention Costs
The Fed should have included fraud prevention and data security costs in determining
the rate cap for larger issuers, but it did not. Instead, the Fed said it will issue a future
proposal on issuers’ recoupment of fraud-prevention costs, but has suggested two
possible fraud-prevention cost approaches for comment. EFTA Section 920 allows the
Fed to allow a debit interchange fee increase to cover an issuer’s fraud-prevention costs
if: (1) the fee increase is reasonably necessary to cover the issuer’s costs in preventing

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debit card fraud, and (2) the issuer complies with fraud-prevention standards
established by the Fed.
The Fed’s two possible approaches to addressing fraud prevention costs are:

     Technology-specific approach. The first possible approach would allow fraud-
       prevention costs for implementation of specific, major technological
       innovations—as identified by the Fed—that the Fed believes would likely result
       in substantial reductions in total, industry-wide fraud losses. The Fed would then
       require issuers to implement the specific technology in order to be entitled to the
       fee increase.

     Non-prescriptive approach. The second possible approach would allow issuers to
       recoup fraud-prevention costs related to an effective fraud-prevention program,
       but would not set forth specific technologies that must be employed as part of
       the program.

In issuing the standards and prescribing regulations for the fraud-prevention cost
adjustment, the Fed must consider:
                  1) The nature, type, and occurrence of fraud in electronic debit
                     transactions;
                  2) The extent to which the occurrence of fraud depends on whether
                     the authorization in an electronic debit transaction is based on a
                     signature, PIN, or other means;
                  3) The available and economical means by which fraud on electronic
                     debit transactions may be reduced;
                  4) The fraud-prevention and data-security costs expended by each
                     party involved in the electronic debit transactions (including
                     consumers, persons who accept debit cards as a form of payment,
                     financial institutions, retailers, and payment card networks);
                  5) The costs of fraudulent transactions absorbed by each party
                     involved in such transactions (including consumers, persons who
                     accept debit cards as a form of payment, financial institutions,
                     retailers, and payment card networks);
                  6) The extent to which interchange transaction fees have in the past
                     reduced or increased incentives for parties involved in electronic
                     debit transactions to reduce fraud on such transactions; and
                  7) Such other factors as the Fed considers appropriate.




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Network Exclusivity and Routing Requirements That Apply To All Issuers,
Regardless of Size
EFTA Section 920 requires the Fed to issue rules—which would apply to all debit card
issuers regardless of asset size—prohibiting an issuer or card network from restricting
the networks on which a debit transaction can be processed. Also required are rules
prohibiting an issuer or payment card network from inhibiting merchants from routing the
transaction through a network of the merchant’s choice.
The Fed proposes two possible ―alternatives‖ to fulfill the prohibition on exclusive
arrangement requirements:

       ―Alternative A‖ would require an issuer to provide debit cards that could be
       processed by two unaffiliated networks, such as one PIN network and one
       unaffiliated network using signature authorization (or two unaffiliated PIN
       networks, or two unaffiliated signature networks).
      While CUNA did not support any issuer having to participate in more card
       networks than they currently do, in light of the requirements of the interchange
       amendment, we suggested this approach to the Fed to limit additional costs
       small issuers may incur in order to join more networks.
      ―Alternative B‖ would require a credit union to issue debit cards that could be
       processed on at least two unaffiliated PIN networks and also on at least two
       unaffiliated signature networks.
      CUNA adamantly opposes this approach.
The Fed is also proposing to implement ETFA section 920’s prohibition on restricting
merchants’ routing choices. Under the proposal:

     Issuers and payment card networks would be prohibited from limiting merchants’
       ability to choose which network on which a transaction should be routed, but
       only with respect to networks that the debit card is enabled to be used on
       anyway.
     In other words, issuers and card networks would not be able to restrict a
       merchant from choosing between the various networks that have been enabled
       for a particular debit card, but the merchant would not be able to route the
       transaction through a network that the debit card is not compatible with already.
     While this language could be useful, there is still no mechanism to ensure
       networks will offer two-tiered systems and that merchants will not be able to
       direct transactions to large issuers.




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ATM Transaction Routing
This proposal does not propose rules on ATM transaction routing. The Fed, however, is
considering expanding Regulation II’s scope to include ATM networks with respect to
routing requirements—but not the rule’s interchange fee price controls—at some point
in the future and is therefore seeking comments specifically on ATM transaction routing
and exclusivity requirements.

EFTA Section 920 does not expressly address ATM transactions. The Fed, however,
thinks that EFTA Section 920 could be read to bring ATM transactions within the
coverage of Regulation II and therefore requests comment on issues such as whether
Regulation II’s network exclusivity and routing requirements should be expanded to
apply to ATM networks at some future date. The Fed is also specifically requesting
comment on the effect of treating ATM transactions as "electronic debit transactions"
under the rule on small issuers—which may mean that the Fed would propose
exempting small issuers from these ATM transaction routing requirements if the Fed
proposes them at all—as well as the cardholder benefit, if any, of such an approach for
small issuers.

At this point, CUNA does not agree that ATM transactions should be part of this rule.

Prepaid Cards, Government-Administered Program Cards, & ATM Networks
Proposed Regulation II and the rule’s commentary would set new requirements for
general use prepaid debit cards as well as for government-administered payment
program debit card issuers. Issuers of prepaid and government cards would be
required to provide ―reasonable and convenient‖ ATM access for those cards. The Fed’s
proposed commentary would define ―reasonable and convenient‖ ATM access to mean
that there must be at least one ATM on the issuer’s ―designated ATM network‖ located
in the same metropolitan statistical area (MSA) as the last known address of the prepaid
card holder, or if the holder’s address is not known, where the card was first purchased
or issued. The Fed states that the purpose of this comment is to clarify that, if an issuer
does not have its own network of proprietary ATMs, the network the issuer identifies as
its ―designated ATM network‖ is one in which a person using a debit card can access an
ATM with relative ease.
CUNA has been in close contact with key officials within the Treasury Department and
will continue to work with them on the impact of these provision on government-
sponsored benefit programs.




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            QUESTIONS TO ADDRESS REGARDING THE
                      PROPOSED RULE

 Enforcement of the small issuer exemption. The Fed’s proposal does not include
   provisions to enforce the small issuer exemption. Shouldn’t the Fed reinforce
   the small issuer exemption to ensure that it works as Congress intended?

 Small issuer certification for credit unions under $10 billion. This proposed
   processes seems cumbersome. Do you agree the Fed should establish some
   sort of process to determine which institutions are exempt from the rate setting
   requirements? Should the Fed develop such a certification process for
   determining which issuers fall within the small issuer exemption or should the
   Fed permit payment card networks to develop their own small issuer certification
   processes? If the Fed establishes the certification process, is it reasonable to
   require a credit union to notify a payment card network that it is a small issuer
   within 90 days of the end of the preceding calendar year in order to be eligible
   for the exemption?

 Reasonable and proportional fees. As discussed above, the Fed is requesting
   comment on two alternative standards for debit interchange price controls for
   credit unions and banks with $10 billion or more in assets (but which could
   ultimately apply to all credit unions):
      1) Proposed Alternative 1 would give issuers a choice between a safe harbor
          of 7 cents per transaction or the issuer’s allowable expenses (as
          documented by the issuer) up to 12 cents per transaction.
      2) Proposed Alternative 2 would allow a fee which is a percentage of the
          transaction’s value up to a maximum 12 cents per transaction without
          requiring documentation of expenses.
 Is either approach preferable, Alternative 1 or Alternative 2, or should both
   approaches be opposed in favor of the Fed going back to the drawing board to
   include more of the reasonable costs that are associated with providing debit
   card programs?


 Limitation on debit card routing and exclusivity restrictions. The Fed is
   requesting comment on two alternative approaches to implement the statute's
   required rules that prohibit network exclusivity.
     A. Under Alternative A, an issuer or payment card network may not restrict
         the number of payment card networks over which an electronic debit
         transaction may be carried to fewer than two unaffiliated networks. Under
         this alternative, it would be sufficient for an issuer to issue a debit card that
         can be processed over one signature-based network and one PIN-based
         network, provided the networks are not affiliated. CUNA feels this is the
         only option that is feasible AND consistent with the statute.

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      B. Under Alternative B, an issuer or payment card network may not restrict
         the number of payment card networks over which an electronic debit
         transaction may be carried to less than two unaffiliated networks for each
         method of authorization the cardholder may select. Under this alternative,
         an issuer that used both signature- and PIN-based authorization would
         have to enable its debit cards with two unaffiliated signature-based
         networks and two unaffiliated PIN-based networks. However, requiring
         more than two networks would be totally inconsistent with EFTA Section
         920(b), which only requires two unaffiliated networks total.

 Alternative A is more consistent with EFTA Section 920’s requirement that a card
   not be limited to a single network or to two or more affiliated networks, and
   would likely result in a lower regulatory burden on credit unions than Alternative
   B (which would effectively require at least four networks per debit card). Is
   Alternative A preferable?


 Fraud-prevention costs. The Fed says it will issue a future proposal on fraud-
   prevention costs based on the comments it receives in this rulemaking.
   However, shouldn’t the rate setting rules be held up until the Fed includes fraud
   prevention costs as Congress directed?
 In this proposal, the Fed suggests two possible approaches to interchange fee
   increases related to fraud-prevention efforts:
      o Technology-specific approach. The first possible approach would allow
          fraud-prevention costs for implementation of specific, major technological
          innovations—as identified by the Fed—that the Fed believes would likely
          result in substantial reductions in total, industry-wide fraud losses. The
          Fed would then require issuers to implement the specific technology in
          order to receive the fee increase.
      o Non-prescriptive approach. The second possible approach would allow
          fraud-prevention costs related to an effective fraud-prevention program,
          but would not set forth specific technologies that must be employed as
          part of the program.
 Are either of these possible approaches preferable, the centralized approach
   where the government identifies the anti-fraud innovations or the non-
   prescriptive approach where credit unions and other industry participants
   identify and employ effective anti-fraud measures?

 Coverage of ATM transactions and networks. The Fed requests comment on
   whether ATM transactions and ATM networks should be included within the
   scope of the rule as part of a future proposal. It is questionable whether such
   transactions should be included under the rule, as they are not specifically
   addressed in the statute.

      o Regulation II’s application to ATMs. Should the network exclusivity
        provisions of the proposed rule apply to ATM transactions even though the
        statute does not expressly mention ATM transactions, ATM transactions
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         are governed by other laws, and an ATM withdrawal is not typically a
         payment to a merchant?

      o ATMs & routing. If the Fed requires two unaffiliated networks for each
        authorization method, should it explicitly require an issuer to ensure that
        ATM transactions may be routed over at least two unaffiliated ATM
        networks? Should the Fed state that one point-of-sale debit network and
        one ATM-only network is enough to satisfy the exclusivity prohibition
        under either proposed routing Alternative A or proposed routing
        Alternative B (as described above)?

      o Small issuers and ATMs. If ATM transactions are added to the scope of
        Regulation II’s routing and exclusivity provisions, should small issuers be
        exempt from these requirements as they apply to ATMs? Would there be
        cardholder benefits to such an approach?

 Prepaid debit card & government card reasonable and convenient ATM access.
   The Fed’s proposed commentary would define ―reasonable and convenient‖
   ATM access to require prepaid debit card issuers and issuers of government-
   administered payment program cards to provide access to an ATM within the
   MSA in which the last known address of the person to whom the card is issued
   is located or—if the address is not known—where the card was first purchased
   or issued. The Fed states that the purpose of this comment is to clarify that if an
   issuer does not have its own network of proprietary ATMs that the network the
   issuer identifies as its ―designated ATM network‖ is one in which a person using
   a debit card can access an ATM with relative ease. Is this approach to prepaid
   and government program debit cards reasonable?

 Definitions. Many of proposed Regulation II’s definitions follow the EFTA 920's
   definitions but the proposal also includes definitions for terms not defined in that
   section. Those definitions are either based on existing statutory or regulatory
   definitions, or are based on terminology in the debit card industry. The Fed
   requests comment on all of the proposed terms and definitions, especially any
   which are unclear or confusing:

      o ―Account.‖ The Fed proposes defining ―account‖ to mean ―a transaction,
        savings, or other asset account (other than an occasional or incidental
        credit balance in a credit plan) established for any purpose and that is
        located in the United States.‖ The proposed definition will apply to
        accounts established primarily for personal, family, or household
        purposes, accounts established for business purposes, and accounts held
        by a financial institution under a bona fide trust arrangement.

      o ―Acquirer.‖ The proposal defines ―acquirer‖ to mean ―a person that
        contracts directly or indirectly with a merchant to provide settlement for the
        merchant’s electronic debit transactions over a payment card network. An
        acquirer does not include an institution that acts only as a processor for

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   the services it provides to the merchant.‖ Therefore "acquirer" is limited to
   those entities serving a financial institution function with respect to the
   merchant, as distinguished from a processor function; the proposal also
   explicitly excludes entities that solely process transactions for the
   merchant from the term "acquirer."

o ―Affiliate‖ & ―Control‖ of a company. The proposal defines ―affiliate‖ for
  purposes of asset-size determination—i.e. an issuer’s total assets for
  purposes of the small issuer exemption includes the assets of its
  ―affiliates‖—to mean ―any company that controls, is controlled by, or is
  under common control with another company.‖

          ―Control.‖ ―Control‖ of a company is defined as: ―(1) Ownership,
           control, or power to vote 25 percent or more of the outstanding
           shares of any class of voting security of the company, directly or
           indirectly, or acting through one or more other persons; (2) Control
           in any manner over the election of a majority of the directors,
           trustees, or general partners (or individuals exercising similar
           functions) of the company; or (3) The power to exercise, directly or
           indirectly a controlling influence over the management policies of
           the company….‖

o ―Cardholder.‖ The proposal defines ―cardholder‖ to mean the person to
  whom a debit card is issued. Each person to whom a debit card is issued
  on an account, such when multiple employees have debit cards drawn on
  a business account, will be considered a ―cardholder.‖ With respect to
  prepaid cards, the ―cardholder‖ is the person who purchased the prepaid
  card or who received the card from the purchaser.

o ―Debit card.‖ The proposal defines ―debit card‖ as ―any card, or other
  payment code or device, issued or approved for use through a payment
  card network to debit an account, regardless of whether authorization is
  based on signature, personal identification number (PIN), or other means,
  and regardless of whether the issuer holds the account, and includes any
  general-use prepaid card.‖ ―Debit cards‖ would include a device with a
  chip or other embedded mechanism (such as a mobile phone) regardless
  of form factor. In addition, ―decoupled debit‖ cards—i.e. where the issuer
  is not the institution that holds the account and the transaction is settled
  between the issuer and the account-holding institution by ACH—and
  ―deferred debit arrangements‖ would be considered ―debit cards.‖ The
  term "debit card" does not include: (i) any card, or other payment code or
  device, that is redeemable upon presentation at only a single merchant or
  an affiliated group of merchants for goods or services; (ii) a check, draft, or
  similar paper instrument, or an electronic representation thereof; or (iii) an
  account number, when used to initiate an ACH transaction to debit a
  person's account.


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o ―Designated ATM network.‖ The proposal defines ―designated ATM
  network‖ in the context of prepaid debit cards and government-issued
  debit cards to mean ―either: (1) all automated teller machines identified in
  the name of the issuer; or (2) any network of automated teller machines
  identified by the issuer that provides reasonable and convenient access to
  the issuer's customers.‖

o ―Electronic debit transaction.‖ The proposal defines ―electronic debit
  transaction‖ to mean ―the use of a debit card by a person as a form of
  payment in the United States.‖ Only transactions involving merchants
  located in the United States would be regulated by the proposal. The
  proposed commentary clarifies that ―electronic debit transaction‖ applies
  not only to the initial purchase of goods or services, but also to returns and
  refunds.

o ―General-use prepaid card.‖ The proposal defines ―general-use prepaid
  card‖ to mean ―a card, or other payment code or device, that is: (1) Issued
  on a prepaid basis, whether or not that amount may be increased or
  reloaded, in exchange for payment; and (2) Redeemable upon
  presentation at multiple, unaffiliated merchants for goods or services, or
  usable at automated teller machines.‖ This would not apply to store gift
  cards under most circumstances, but would apply to some mall gift cards
  that are network branded (e.g., Visa) and can be used at retailers outside
  the mall.

o ―Interchange transaction fee.‖ The Fed proposes to define ―interchange
  transaction fee‖ to mean ―any fee established, charged, or received by a
  payment card network and paid by a merchant or acquirer for the purpose
  of compensating an issuer for its involvement in an electronic debit
  transaction.‖ The proposed commentary clarifies that interchange
  transaction fees are limited to fees charged by a network to compensate
  issuers and not for fees charged for other purposes, such as to
  compensate the network for its services to acquirers or issuers.

o ―Issuer.‖ The proposal defines ―issuer‖ to mean ―any person that issues a
  debit card.‖ The debit card provided may or may not have the name of the
  issuer on it (such as if a bank issuer has partnered with a retail store).
  Issuers of decoupled debit cards will not be considered ―issuers‖ for
  purposes of the small issuer exemption because they do not hold the
  account being debited.

         ―Issuer‖ and third-party agents. The proposed definition of ―issuer‖
          incorporates the statute's definition of "issuer" ("any person who
          issues a debit card or the agent of such person with respect to the
          card‖) but removes the phrase "or the agent of such person with
          respect to the card" because, according to the Fed, ―[a]n issuer that
          outsources certain issuing functions retains the underlying

                                                                             12
          relationship with the cardholder and should retain responsibility for
          complying with the rule's requirements as they pertain to issuers.‖
          Is it appropriate for the Fed to remove the phrase "or the agent of
          such person with respect to the card" from the definition of ―issuer?‖
          Are there circumstances in which a third-party agent of a credit
          union should be considered an ―issuer‖ within the rule's definition,
          especially with respect to regulatory compliance?

o ―Merchant.‖ The Fed proposes to define ―merchant‖ as ―any person that
  accepts debit cards as payment for goods or services.‖ The proposal
  does not include additional commentary on this definition.

o ―Payment card network.‖ The proposal defines ―payment card network‖ to
  mean ―an entity that: (1) directly or indirectly provides the services,
  infrastructure, and software for authorization, clearance, and settlement of
  electronic debit transactions; and (2) establishes the standards, rules, or
  procedures that govern the rights and obligations of issuers and acquirers
  involved in processing electronic debit transactions through the network.‖
  The Fed is seeking comment on whether non-traditional or emerging
  payment systems would be covered by the ―payment card network‖
  definition, such as payments made with mobile phones which are billed to
  a mobile phone account, or payments made through a non-depository
  institution intermediary such as PayPal.

o ―Person.‖ The Fed proposes to define ―person‖ to mean ―a natural person
  or an organization, including a corporation, government agency, estate,
  trust, partnership, proprietorship, cooperative, or association.‖

o ―Processor.‖ The proposal defines ―processor‖ as ―a person that
  processes or routes electronic debit transactions for issuers, acquirers, or
  merchants.‖

o ―United States.‖ The proposal defines ―United States‖ to include ―the
  States, territories, and possessions of the United States, the District of
  Columbia, the Commonwealth of Puerto Rico, or any political subdivision
  of any of the foregoing.‖




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