Q: If the issuer of a general-use prepaid card may settle the prepaid card transactions with the cardholder by initiating a debit transaction, such as an ACH debit, to another account of the cardholder, does the card qualify for the exemption in § 235.5(c)?
A: No. If an issuer of a general-use prepaid card may settle transactions (either wholly or in part) with the cardholder by initiating debit transactions to another account (as defined in § 235.2(a)) of the cardholder instead of using prepaid funds underlying the card, the card is issued or approved for use to access an account held by or for the benefit of the cardholder and does not qualify for the exemption in § 235.5(c). (Added March 13, 2013)
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: