Q: Must an issuer of a general-use prepaid card that is enabled for processing transactions over a PIN network and an unaffiliated signature network provide or have the cardholder select a PIN at the time the prepaid card is purchased for the card to comply with § 235.7(a)?
A: An issuer complies with § 235.7(a)'s prohibition on network exclusivity only if card transactions can be processed over both unaffiliated networks enabled on the card. If a PIN network enabled on the card requires a cardholder to use a PIN for transactions, transactions can be processed over that PIN network only if the cardholder has a PIN to use for card transactions. Where an issuer intends to meet the requirements of § 235.7(a) by enabling a PIN network on the card, the issuer complies by providing a PIN to the cardholder or having the cardholder select a PIN before or at the time a merchant first prompts the cardholder to enter a PIN. The following examples illustrate how an issuer may comply with § 235.7(a) but are not intended to be exhaustive. An issuer may comply by activating the card at the time of purchase and providing a PIN or having the cardholder select a PIN at that time, or by activating the card by telephone subsequent to purchase and providing a PIN or having the cardholder select a PIN at the time of activation. An issuer also may comply by activating the card at the time of purchase and having the cardholder select a PIN the first time a merchant prompts the cardholder to enter a PIN prior to completing the transaction. If an issuer mails a prepaid card to a cardholder, the issuer may separately mail a PIN if the PIN would normally be received by the cardholder within 2 business days of the card. (Revised May 30, 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: