Payees that decide not to accept all cards or other payment instruments of a payment card scheme shall inform consumers of this, in a clear and unequivocal manner, at the same time as they inform consumers of the acceptance of other cards and payment instruments of the payment card scheme. 3. Any routing principles or equivalent measures aimed at directing transactions through a specific channel or process and other technical and security standards and requirements with respect to the handling of two or more different payment brands and payment applications on a card-based payment instrument shall be non-discriminatory and shall be applied in a non-discriminatory manner. You currently have JavaScript disabled in your web browser, please enable JavaScript to view our website as intended. The reference period for the first calculation of such value shall commence 15 calendar months before the date of application of paragraphs 2 and 3 and shall end three calendar months before that date. 3. From: HM Treasury. allow payment service providers to apply a per transaction interchange fee of no more than EUR 0,05, or, in the Member States whose currency is not the euro, the corresponding value in the national currency on 8 June 2015, which shall be revised every five years or whenever there is a significant variation in exchange rates. The ‘Honour all Cards’ rule is a twofold obligation imposed by issuers and payment card schemes for payees to accept all the cards of the same brand, irrespective of the different costs of these cards (the ‘Honour all Products’ element) and irrespective of the individual issuing bank which has issued the card (the ‘Honour all Issuers’ element). Any rule in licensing agreements, in scheme rules applied by payment card schemes and in agreements entered into between card acquirers and payees preventing payees from informing payers about interchange fees and merchant service charges shall be prohibited. With the payee's prior and explicit consent, the information referred to in the first subparagraph may be aggregated by brand, application, payment instrument categories and rates of interchange fees applicable to the transaction. Therefore the ‘Honour all Issuers’ element of the ‘Honour all Cards’ rule is a justifiable rule within a payment card scheme, since it prevents payees from discriminating between individual banks which have issued a card. As a consequence, payment card schemes and payment service providers should be obliged to provide relevant data to national competent authorities as specified by those authorities and in accordance with the time limits set by them. Insert free text, CELEX number or descriptors. Member States shall ensure and promote adequate and effective out-of-court complaint and redress procedures or take equivalent measures for the settlement of disputes arising under this Regulation between payees and their payment service providers. 3. The IFR caps took effect from 9 December 2015. In the case of distance sales, this information shall be displayed on the payee's website or other applicable electronic or mobile medium. 4. e-commerce) as defined in point 7 of Article 2 of Directive 2011/83/EU, the point of sale shall be the address of the fixed place of business at which the merchant conducts its business regardless of website or server locations through which the payment transaction is initiated; in the event that the merchant does not have a fixed place of business, the point of sale shall be the address for which the merchant holds a valid business licence through which the payment transaction is initiated; in the event that the merchant does not have a fixed place of business nor a valid business licence, the point of sale shall be the address for correspondence for the payment of its taxes relating to its sales activity through which the payment transaction is initiated; ‘payment brand’ means any material or digital name, term, sign, symbol or combination thereof, capable of denoting under which payment card scheme card-based payment transactions are carried out; ‘co-badging’ means the inclusion of two or more payment brands or payment applications of the same brand on the same card-based payment instrument; ‘co-branding’ means the inclusion of at least one payment brand and at least one non-payment brand on the same card-based payment instrument; ‘debit card’ means a category of payment instrument that enables the payer to initiate a debit card transaction excluding those with prepaid cards; ‘credit card’ means a category of payment instrument that enables the payer to initiate a credit card transaction; ‘prepaid card’ means a category of payment instrument on which electronic money, as defined in point 2 of Article 2 of Directive 2009/110/EC, is stored. Merchants accepting debit cards would then not be forced to accept credit cards, and those accepting credit cards would not be forced to accept commercial cards. As a result, consumers and merchants face restricted choice, higher prices and lower quality of payment services, while their ability to use pan-Union payment solutions is also restricted. (11) The existing wide var iety of interchange fees and their level prevent the emergence of new pan-Union players on In order to ensure that competition between brands is effective, it is important that the choice of payment application be made by users, not imposed by the upstream market, comprising payment card schemes, payment service providers or processors. The Reg ulation on Interchange Fees for Card-based payment transactions entered into force in June 2015. Except where a particular payment instrument is imposed by law for certain categories of payments or cannot be refused due to its legal tender status, the payee should be free, in accordance with Directive 2007/64/EC, to steer payers towards the use of a specific payment instrument. If you have a complaint about a breach of the IFR, you may submit it to us. For example, the credit card cap could be applied to the defined share of the total value of the transactions for merchants or acquirers. Interchange Fee Regulation Phase 3 – Effective Thursday 9th June, 2016 Date: May, 2016 Contact: Peter Robinson, liberticonsulting@gmail.com REGULATION ON INTERCHANGE FEES FOR CARD-BASED PAYMENT TRANSACTIONS On 9th June, the last set of rules under the Interchange Fee Regulation will enter into force, For the purposes of this Regulation, the following definitions shall apply: ‘acquirer’ means a payment service provider contracting with a payee to accept and process card-based payment transactions, which result in a transfer of funds to the payee; ‘issuer’ means a payment service provider contracting to provide a payer with a payment instrument to initiate and process the payer's card-based payment transactions; ‘consumer’ means a natural person who, in payment service contracts covered by this Regulation, is acting for purposes other than the trade, business or profession of that person; ‘debit card transaction’ means a card-based payment transaction, including those with prepaid cards that is not a credit card transaction; ‘credit card transaction’ means a card-based payment transaction where the amount of the transaction is debited in full or in part at a pre agreed specific calendar month date to the payer, in line with a prearranged credit facility, with or without interest; ‘commercial card’ means any card-based payment instrument issued to undertakings or public sector entities or self-employed natural persons which is limited in use for business expenses where the payments made with such cards are charged directly to the account of the undertaking or public sector entity or self-employed natural person; ‘card-based payment transaction’ means a service based on a payment card scheme's infrastructure and business rules to make a payment transaction by means of any card, telecommunication, digital or IT device or software if this results in a debit or a credit card transaction. (“the interchange fee regulation”). Eliminating direct and indirect obstacles to the proper functioning and completion of an integrated market for electronic payments, with no distinction between national and cross-border payments, is necessary for the proper functioning of the internal market. Such an arrangement should not prevent payers and payees from setting a default choice of application, where technically feasible, provided that that choice can be changed for each transaction. 1. A separation of scheme and infrastructure should allow all processors to compete for customers of the schemes. In addition, the payer should be informed about the acceptance of the payer's payment instrument(s) at a given point of sale. In addition, payment card schemes shall not adopt or apply business rules that restrict interoperability among processing entities within the Union. The European Commission’s intention with the IFR caps is to redistribute the revenue from issuer banks to merchants and on to consumers. With deferred debit cards, the total amount of transactions is debited from the cardholder account at a pre-agreed specific date, usually once a month, without interest to be paid. (3)  Position of the European Parliament of 10 March 2015 (not yet published in the Official Journal) and Decision of the Council of 20 April 2015. The existing wide variety of interchange fees and their level prevent the emergence of new pan-Union players on the basis of business models with lower or no interchange fees, to the detriment of potential economies of scale and scope and their resulting efficiencies. Payees shall retain the option of installing automatic mechanisms in the equipment used at the point of sale which make a priority selection of a particular payment brand or payment application but payees shall not prevent the payer from overriding such an automatic priority selection made by the payee in its equipment for the categories of cards or related payment instruments accepted by the payee. Member States shall notify the Commission of those bodies by 9 June 2017. The competent authorities may require that such information is certified by an independent auditor. The Interchange Fee Regulation (IFR) sets a requirement for card schemes to separate their processing activities by making them independent in terms of accounting, organisation and … This prohibition shall also cover any rule prohibiting payees from treating card-based payment instruments of a given payment card scheme more or less favourably than others. The Interchange Fees Regulation will bring significant benefits for consumers and retailers, notably by reducing the costs of card payments. In order to define the relevant interchange fee caps for domestic debit card transactions, it is appropriate to allow national competent authorities entitled to ensure compliance with this Regulation to collect information regarding the volume and value of all debit card transactions within a payment card scheme or of the debit card transactions pertaining to one or more payment service providers. Such discriminatory practises contribute to market fragmentation, negatively impact market entry by new players and prevent pan-Union players from emerging, hence hindering the completion of the internal market in the area of card-based payments and internet and mobile payments based on cards, to the detriment of merchants, companies and consumers. A payment service provider can be an issuer or an acquirer or both; ‘payment service user’ means a natural or legal person making use of a payment service in the capacity of either payer or payee, or both; ‘payment transaction’ means an action, initiated by the payer or on its behalf or by the payee of transferring funds, irrespective of any underlying obligations between the payer and the payee; ‘processing’ means the performance of payment transaction processing services in terms of the actions required for the handling of a payment instruction between the acquirer and the issuer; ‘processing entity’ means any natural or legal person providing payment transaction processing services; ‘point of sale’ means the address of the physical premises of the merchant at which the payment transaction is initiated. It should not prevent Member States from maintaining or introducing lower caps or measures of equivalent object or effect through national legislation. In addition to a consistent application of the competition rules to interchange fees, regulating such fees would improve the functioning of the internal market and contribute to reducing transaction costs for consumers. Card-based payment transactions instead of payments in cash could therefore be beneficial for merchants and consumers, provided that the fees for the use of the payment card schemes are set at an economically efficient level, whilst contributing to fair competition, innovation and market entry of new operators. Click the links below to learn more about how the IFR affects people and businesses. 5. By derogation from paragraph 1, until 9 December 2016, Member States may define a share of no more than 30 % of the domestic payment transactions referred to in paragraph 1 of this Article that are considered to be equivalent to credit card transactions to which the interchange fee cap set in Article 4 shall apply. This requirement prevents acquirers from successfully offering their services on a cross-border basis. The Payment Card Interchange Fee and Merchant Discount Antitrust Litigation is a United States class-action lawsuit filed in 2005 by merchants and trade associations against Visa, MasterCard, and numerous financial institutions that issue payment cards. 2. This Regulation does not apply to services based on specific payment instruments that can be used only in a limited way, that meet one of the following conditions: instruments allowing the holder to acquire goods or services only in the premises of the issuer or within a limited network of service providers under direct commercial agreement with a professional issuer; instruments which can be used only to acquire a very limited range of goods or services; instruments valid only in a single Member State provided at the request of an undertaking or a public sector entity and regulated by a national or regional public authority for specific social or tax purposes to acquire specific goods or services from suppliers having a commercial agreement with the issuer. The information shall be provided to the payer in good time before the payer enters into a purchase agreement with the payee. 4. the merchant service charge and the interchange fee). (6)  Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009 (OJ L 94, 30.3.2012, p. 22). Certain fees relating to some American Express card transactions are also capped. The suit was filed due to price fixing and other allegedly anti-competitive trade practices in the credit card industry. As the cost of processing is a significant part of the total cost of card acceptance, it is important for this part of the value chain to be opened to effective competition. The acquiring service constitutes a chain of operations from the initiation of a card-based payment transaction to the transfer of the funds to the payment account of the payee. Competition between payment card schemes to convince payment service providers to issue their cards leads to higher rather than lower interchange fees on the market, in contrast with the usual price-disciplining effect of competition in a market economy. 5. The annual transaction values referred to in paragraphs 2 and 3 shall be calculated on a yearly basis, commencing on 1 January and ending on 31 December and shall be applied starting from 1 April of the following year. The main objectives of the Regulation are the creation of a single market for card payments and the prevention of competition restrictions, including the inability of merchants to negotiate fees below the interchange fees levels (floor effect) resulting in higher costs for retailers and consumers. 2. 2. The EC MIF Regulation (also called the Interchange Fee Regulation / IFR) refers to the regulation of the European Parliament and of the Council on multilateral interchange fees (MIFs) for card-based payment transactions. Information to the payee on individual card-based payment transactions. 1. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Card-based payment transactions exclude transactions based on other kinds of payment services; ‘cross-border payment transaction’ means a card-based payment transaction where the issuer and the acquirer are located in different Member States or where the card-based payment instrument is issued by an issuer located in a Member State different from that of the point of sale; ‘domestic payment transaction’ means any card-based payment transaction which is not a cross-border payment transaction; ‘interchange fee’ means a fee paid for each transaction directly or indirectly (i.e. Settlement, out of court complaints and redress procedures. It shall apply from 8 June 2015, with the exception of Articles 3, 4, 6 and 12, which shall apply from 9 December 2015, and of Articles 7, 8, 9 and 10, which shall apply from 9 June 2016. To avoid this, the ‘net compensation’ of fees paid or received by the issuer, including possible authorisation charges, from or to a payment card scheme, an acquirer or any other intermediary should be considered as the interchange fee. 1. After the execution of an individual card-based payment transaction, the payee's payment service provider shall provide the payee with the following information: the reference enabling the payee to identify the card-based payment transaction; the amount of the payment transaction in the currency in which the payee's payment account is credited; the amount of any charges for the card-based payment transaction, indicating separately the merchant service charge and the amount of the interchange fee. This Regulation complies with the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, notably the right to an effective remedy or to a fair trial, the freedom to conduct a business, consumer protection and has to be applied in accordance with those rights and principles. For domestic debit card transactions Member States may either: define a per transaction percentage interchange fee cap lower than the one provided for in paragraph 1 and may impose a fixed maximum fee amount as a limit on the fee amount resulting from the applicable percentage rate; or. The competent authorities referred to in Article 13 shall, upon their written request, require payment card schemes and/or payment service providers to provide all information necessary to verify the correct application of paragraphs 3 and 4 of this Article. Regulation II (Debit Card Interchange Fees and Routing) establishes standards for assessing whether a debit card interchange fee received by a debit card issuer for an electronic debit transaction is reasonable and proportional to the costs incurred … 1. Therefore the payment service provider paying the interchange fee does not always contract directly with the payee. Reporting obligations should extend to payment service providers such as issuers or acquirers and not only to payment card schemes, in order to ensure that any relevant information is made available to the competent authorities which should, in any case, be able to require that such information is collected through the payment card scheme. 3. 3. Other price regulation: Other aspects of the retail payments system could be covered by price regulation, for example the whole merchant service fee, card fees for consumers, or other product types (e.g. Member States shall notify the Commission of those competent authorities by 9 June 2016. (9)  Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12). Many four party payment card schemes use an explicit interchange fee, which is mostly multilateral. To counter this, the measures imposing restrictions on interchange fees should only apply to payment cards that have become mass products and merchants generally have difficulty refusing due to their widespread issuance and use (i.e. In order to enhance effective market functioning in the non-regulated parts of the sector and to limit the transfer of business from the regulated to the non-regulated parts of the sector, it is necessary to adopt a series of measures, including the separation of scheme and infrastructure, the steering of the payer by the payee and the selective acceptance of payment instruments by the payee. 1. These Regulations comply with the obligations to designate competent authorities, lay down rules on penalties and take measures for the settlement of disputes under Articles 13 to 15 of Regulation (EU) 2015/751 of the European Parliament and of the Council of 29th April 2015 on interchange fees for card-based payment transactions (OJ L 123, 19.5.2013, p.1.) This Regulation should cover all transactions where the payer's payment service provider and the payee's payment service provider are located in the Union. Member States shall notify those provisions to the Commission by 9 June 2016 and shall notify without delay of any subsequent amendment affecting them. It should also be possible to apply such a flat rate in combination with a percentage rate, provided that the sum of such interchange fees does not exceed the specified percentage of the total annual transaction value at domestic level within each payment card scheme. It is important to ensure that the provisions concerning the interchange fees to be paid or received by payment service providers are not circumvented by alternative flows of fees to issuers. This is our revised guidance on how we... What are payment cards and card payment... Based in the Olympic Park, Stratford, we're easily reached via the Jubilee Line, Central Line, DLR, and numerous bus and coach routes. 4. Licensing. On the basis of the separation of scheme and infrastructure, card schemes and processing entities should be independent in terms of accounting, organisation and decision-making process. Interchange fee regulation The Board's view is that interchange fees should generally be as low as possible, especially in mature payments systems. The issuer makes payment cards available to the payer, authorises transactions at terminals or their equivalent and may guarantee payment to the acquirer for transactions that are in conformity with the rules of the relevant scheme. The European Banking Authority (EBA) may, after consulting an advisory panel as referred to in Article 41 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (9), develop draft regulatory technical standards establishing the requirements to be complied with by payment card schemes and processing entities to ensure the application of point (a) of paragraph 1 of this Article. 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