Q: If a payment card network rebates some or all of an issuer's switch fees or other network processing fees (e.g., because an issuer reached a certain transaction volume), is the rebate for the switch fee or other processing fee excluded for purposes of determining whether the issuer has received net compensation?
A: In general, rebates (including those for network processing fees) received by an issuer from a payment card network are included as compensation for purposes of determining whether the issuer has received net compensation, regardless of the purpose for which the rebate is received. If, however, the network or network's affiliate provides optional issuer-processor services performed on behalf of the issuer, and the network or network's affiliate provides a rebate on fees for those services, that rebate is not included for purposes of determining whether the issuer has received net compensation. See paragraph 6(b)-2 in the commentary to Regulation II. (Added September 14, 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: