Q: Does Payment Card Network A comply with the provisions of section 235.7 if it levies a fee on acquirers for transactions conducted using cards that are enabled for that network but processed over a different payment card network?
A: No. Section 235.7(b) prohibits a payment card network from inhibiting a merchant's ability to route or direct an electronic debit transaction by contract, requirement, condition, penalty, or otherwise. The practice described in Q2 inhibits routing by imposing an additional cost on the use of a competing payment card network. This practice would violate section 235.7 even if Payment Card Network A assessed the fee on all transactions enabled with its brand, including transactions processed over its own network, because the added fee increases the cost of transactions routed over a competing network, the revenue obtained through such fees may reduce the other fees Payment Card Network A levies on acquirers, and the fee places a floor on the cost of using a competing network. The practice in Q2 is unlike the example described in the commentary, which describes a permissible arrangement under which a payment card network offers payments or other incentives to encourage the merchant to use that network. See comment 7(b)-3. (Added May 18, 2015).
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: