The FTC issued on Monday a report to Congress detailing the agency’s activities related to Dodd-Frank-mandated rules on debit card transactions finalized by the Federal Reserve Board last year.
Over the past year, the FTC met with members of Congress, attorneys and economists from the Federal Reserve to clarify and determine areas of conflict in the rule. Last September, the FTC published an explanation of the new rules for merchants, and the FTC staff has met with a number of merchants to discuss concerns about the new rules.
Additionally, the FTC launched and operates an electronic mailbox to allow consumers and retailers to file complaints related to possible violations of the Fed’s new debit rules. Members of the FTC staff also scan the Consumer Sentinel database for complaints related fees associated with electronic transactions.
The FTC has also launched an initial investigation to determine whether some payment card networks may be violating federal regulations and plans to continue gathering additional information from merchants and other stakeholders.
Section 1075 of the Dodd-Frank Act mandated that interchange fees, the amount an issuer charges a merchant to process a debit transaction, be “reasonable and proportional” to the cost of the transaction. The Federal Reserve essentially capped the fees at 21 cents.
The provision also required the Fed to issue regulations eliminating network exclusivity, allowing merchants to now choose between two or more competing payment networks. The rule required the Fed to issue regulations prohibiting payment networks and issuers from adopting rules that prevent merchants from choosing between payment networks.
The interchange fee restriction, in general, does not apply to government-issued debit cards, debit cards from issuers with less than $10 billion in consolidated assets or prepaid cards.
In response to inquiries by the Senate Appropriations Committee, the FTC said in the report that small financial institutions have not been negatively affected by the rules because data from the Federal Reserve revealed that interchange fees paid to exempt issuers are higher than fees paid to non-exempt issuers.
Additionally, the FTC said that it enforces federal regulations protecting consumers and has brought enforcement action against firms that practice unlawful conduct. The agency has also taken several steps, including publishing consumer education information, in order to educate and protect consumers.
The FTC, in coordination with other federal banking regulators, has authority to investigate and enforce Dodd-Frank rules. Overall, the agency focuses primarily on payment card networks and electronic payment transactions.