FTC probes Visa’s debit policies for violations of Durbin Amendment

Visa has agreed to provide antitrust regulators at the Federal Trade Commission with documents related to its PIN Debit Gateway Service, which may have violated the controversial Durbin Amendment.

The FTC’s Bureau of Competition asked Visa in September to voluntarily provide the information on the service. Visa is cooperating with authorities and responding to government requests for information, according to The Wall Street Journal.

The service is optional and offered to merchants who want to route their transactions through other networks but do not have relationships with those networks.

“We suspect that the FTC’s focus is driven by the recent regulations” and increased use of the service “given there are now greater PIN debit routing options,” Darren Peller, a Barclays analyst, said, Convenience Store News reports.

The FTC’s request marks the latest regulatory inquest into Visa’s response to the Durbin Amendment, a provision of the 2010 Dodd-Frank Act that caps the amount banks can charge merchants to process a debit transaction. The U.S. Department of Justice has been investigating business changes made by Visa in response to the legislation.

Under the Durbin Amendment’s exclusivity provision, which took effect in April, all card issuers are required to maintain at least two debit network relationships. In response to the provision, Visa unveiled its new pricing strategy aimed at covering its dominant share in the debit card market, according to The Wall Street Journal.

Neither Visa nor MasterCard, Visa’s biggest competitor, issue cards to consumers. Instead, they maintain processing networks through which purchases are transacted by banks that use their cards and work with retailers.

Before the legislation took effect, a card issuer may have exclusively used Visa’s network to process transactions authorized by a consumer signature or PIN, The Wall Street Journal reports.

The same issuing bank is now required to either add a PIN debit network not operated by Visa as an option to its cards or to replace Visa’s Interlink debit PIN network with an entirely different network. The strategy was intended to allow merchants more control over processing costs by offering more options.

Visa’s strategy charges issuers a fixed fee to use the Visa network, variable fees on every transaction and incentive payments to merchants aimed at luring retail business to the network.  Visa also launched a PIN debit service, which allows the company to process PIN debit transactions even if its network is not offered by the issuer on the card, though it is not the same service being investigated by the FTC, according to The Wall Street Journal.

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