Q: Are payments from a network to an issuer for products or services the issuer provides to the network included under the net compensation test?
A: Not necessarily. Except as otherwise provided in the rule and commentary, if a network purchases from an issuer a product or service, such as an issuer's analysis of transaction patterns across multiple issuers, payment for those goods or services are not subject to the prohibition on net compensation in § 235.6(b) merely because the product or service is connected to debit cards in general. The issuer's pricing of its services should be reasonable and should not be a means to circumvent the interchange fee standards. (See also § 235.6(b) Q7 with respect to banking services provided by issuers to networks.) By contrast, network payments, such as fees or other incentives or bonuses that are specific to the issuer's debit card transactions or debit card activities (such as marketing the network's brand of debit cards or converting the issuer's card base to the network's brand) are subject to the prohibition on net compensation. See comment 6(b)-2.i. (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: