Q: For purposes of § 235.3, what fees paid by a merchant or acquirer may be passed from a network to an issuer as an "interchange transaction fee"?
A: As defined in § 235.2(j), an "interchange transaction fee" is a fee paid by a merchant or acquirer for the purpose of compensating an issuer for its involvement in an electronic debit transaction. For purposes of the definition, the issuer that is compensated through an interchange transaction fee is the issuer of the card used in the electronic debit transaction for which the fee is charged. Any fee charged by a payment card network with respect to an electronic debit transaction other than an interchange transaction fee is a network fee (EFTA Section 920(c), 15 U.S.C. 1693o-2(c)). Such network fees that are passed on to an issuer must be included in the calculation of net compensation for purposes of the net compensation prohibition in § 235.6(b) of Regulation II. (Added October 24, 2011)
This Q&A was obtained from FRB’s website, in a section for Regulation II (Debit Card Interchange Fees and Routing) Frequently Asked Questions, which may be found here: