TCH Submitted Comments in Response to the Board of Governors of the Federal Reserve System’s Proposed Amendments to Regulation II and the Official Board Commentary on Regulation II
The Clearing House (TCH) submitted comments in response to the Board of Governors of the Federal Reserve System’s (Board) notice of proposed rulemaking to amend Regulation II and the Official Board Commentary on Regulation II regarding the prohibition on network exclusivity (the Proposal). In its comments, TCH provided relevant background information on the existing prohibition on network exclusivity, and identified and discussed aspects of the Proposal that would be challenging or impracticable, if not impossible, for issuers to satisfy. In particular, TCH made the following comments:
(1) It would be impracticable, if not impossible, for issuers to comply with the proposed requirement that they must enable at least two unaffiliated payment card networks for every “specific merchant” and “particular type of merchant” for which their debit cards can be used and should eliminate the prosed requirements from any final rule;
(2) The phrase “particular type of merchant” should be clarified by specifying that each electronic debit transaction will be characterized as either a card-present or card-not-present transaction and by establishing a definitive test to differentiate between the two;
(3) The term “geographic area” should be clarified to provide that a payment card network can be used by an issuer to satisfy the prohibition on network exclusivity so long as the payment card network is capable of processing electronic debit transactions in every geographic area or is willing to expand it capabilities to do so, with a presumption that a payment card network is willing to expand its capabilities of processing electronic debit transactions to a geographic area if the payment card network does not limit by rule or policy its operation from any area;
(4) The proposed “means of access” requirements should be clarified so as to apply only with respect to issuer-provided or issuer-approved means of access, and such that “means of access” is not intended to encompass a means or method of authentication or communication;
(5) The Board should publish a definitive list of payment card networks to allow issuers to satisfy the prohibition on network exclusivity by geographic area and transaction type, and should establish a grace period for issuers to come into compliance with the prohibition when a payment card network they are using ceases to qualify for purposes of the issuer satisfying the prohibition; and
(6) The Board should establish an effective date for the modified Proposal that is not earlier than three years following its publication in the Federal Register to give issuers the necessary time to implement the changes.
To read the full comment letter please click here.
(1) It would be impracticable, if not impossible, for issuers to comply with the proposed requirement that they must enable at least two unaffiliated payment card networks for every “specific merchant” and “particular type of merchant” for which their debit cards can be used and should eliminate the prosed requirements from any final rule;
(2) The phrase “particular type of merchant” should be clarified by specifying that each electronic debit transaction will be characterized as either a card-present or card-not-present transaction and by establishing a definitive test to differentiate between the two;
(3) The term “geographic area” should be clarified to provide that a payment card network can be used by an issuer to satisfy the prohibition on network exclusivity so long as the payment card network is capable of processing electronic debit transactions in every geographic area or is willing to expand it capabilities to do so, with a presumption that a payment card network is willing to expand its capabilities of processing electronic debit transactions to a geographic area if the payment card network does not limit by rule or policy its operation from any area;
(4) The proposed “means of access” requirements should be clarified so as to apply only with respect to issuer-provided or issuer-approved means of access, and such that “means of access” is not intended to encompass a means or method of authentication or communication;
(5) The Board should publish a definitive list of payment card networks to allow issuers to satisfy the prohibition on network exclusivity by geographic area and transaction type, and should establish a grace period for issuers to come into compliance with the prohibition when a payment card network they are using ceases to qualify for purposes of the issuer satisfying the prohibition; and
(6) The Board should establish an effective date for the modified Proposal that is not earlier than three years following its publication in the Federal Register to give issuers the necessary time to implement the changes.
To read the full comment letter please click here.