Jun 22, 2013, 10:42 am
Last edit by: ChrisFlyer66
There is a new thread for 2017: http://www.flyertalk.com/forum/manufactured-spending/1819569-pin-available-now-visa-mc-prepaid-debit-cards-2017-a.html
Federal Reserve interpretation of Dodd-Frank financial reform regulations has resulted in Visa/MC gift cards getting PINs as of April 1, 2013.
Setting PINS
At Walmat, many MCs default to credit(and fail) and require pressing a button to change the payment type to debit. Here are the workarounds:
Old POS systems (monochrome black on green terminals and replacement color terminals):
1a. Screen shows "Insert or Swipe Card Quickly" with "Espanol" button in lower right (note if your screen blinks)
1b. Swipe card
1c. Screen shows "Waiting for cashier..." with with working animation in lower center and "Cancel" button in lower right
2. Press "Cancel" on the screen or red button on pad (if your screen blinks, do not hit button until after blink)
3. Press "ATM/DEBIT" from upper left
4. Press "No Cash Back"
5a. Enter PIN
5b. Screen shows "Waiting for cashier..."
6. Cashier hits blue (not green) Debit button on their side.
New POS systems (color terminal):
1. Swipe GC
2. Press "Change Payment" on screen (Yellow button on pad should also work, but screen works better for some. Timing is critical.)
3. Press "DEBIT"
4. Press "No Cash Back"
5. Enter PIN - Screen showing another 'Waiting for cashier...'.
6. Ask Cashier to hit blue color Debit button on the screen
When splitting transactions among multiple cards at a Walmart register, make sure to have the cashier hit the debit button on their physical keypad. If they hit the debit button on the touchscreen, it will not work. If your transaction got declined, try having the cashier hit 'Debit' using the physical keypad on the right of the screen.
As of 6/19/2014, Walmart rejects Debit attempts above $49.99 on all cards issued by InComm/ITC Financial Services, namely all Vanilla VISA and OneVanilla. There is no workaround.
Error Messages
DEBIT NOT AVAILABLE
Not enough funds available to cover whatever amount was typed in, or most likely NOT typed in.
DEBIT NOT APPROVED
Received when the card's monthly load limit had been reached.
HOST TIMEOUT
Connection problems. The GC may be drained but the transaction should reverse itself, and funds will become available again.
Federal Reserve interpretation of Dodd-Frank financial reform regulations has resulted in Visa/MC gift cards getting PINs as of April 1, 2013.
Setting PINS
- MetaBank VISA or Sunrise VISA -use the last four digits of the card number (or to set personal PIN call 888-524-1283)
- US Bank VISA and Mastercard - Newer cards come with a PIN printed on cardstock inside the package. To set/reset PIN, call 866-952-5653. One person reports: VISA that has pre-set PIN locks PIN on first use if not previously reset; always call to set PIN before use. If you forget to reset the pin and you can't unload the funds to your BB, call the toll free # and ask rep. to "reset" the card and they will do some magic and you should then be able to unload the funds at WM.
- Vanilla VISA and OneVanilla(not MyVanilla, etc) - selection of 4 digits on the first transaction becomes the PIN
At Walmat, many MCs default to credit(and fail) and require pressing a button to change the payment type to debit. Here are the workarounds:
Old POS systems (monochrome black on green terminals and replacement color terminals):
1a. Screen shows "Insert or Swipe Card Quickly" with "Espanol" button in lower right (note if your screen blinks)
1b. Swipe card
1c. Screen shows "Waiting for cashier..." with with working animation in lower center and "Cancel" button in lower right
2. Press "Cancel" on the screen or red button on pad (if your screen blinks, do not hit button until after blink)
3. Press "ATM/DEBIT" from upper left
4. Press "No Cash Back"
5a. Enter PIN
5b. Screen shows "Waiting for cashier..."
6. Cashier hits blue (not green) Debit button on their side.
New POS systems (color terminal):
1. Swipe GC
2. Press "Change Payment" on screen (Yellow button on pad should also work, but screen works better for some. Timing is critical.)
3. Press "DEBIT"
4. Press "No Cash Back"
5. Enter PIN - Screen showing another 'Waiting for cashier...'.
6. Ask Cashier to hit blue color Debit button on the screen
When splitting transactions among multiple cards at a Walmart register, make sure to have the cashier hit the debit button on their physical keypad. If they hit the debit button on the touchscreen, it will not work. If your transaction got declined, try having the cashier hit 'Debit' using the physical keypad on the right of the screen.
As of 6/19/2014, Walmart rejects Debit attempts above $49.99 on all cards issued by InComm/ITC Financial Services, namely all Vanilla VISA and OneVanilla. There is no workaround.
Error Messages
DEBIT NOT AVAILABLE
Not enough funds available to cover whatever amount was typed in, or most likely NOT typed in.
DEBIT NOT APPROVED
Received when the card's monthly load limit had been reached.
HOST TIMEOUT
Connection problems. The GC may be drained but the transaction should reverse itself, and funds will become available again.
PIN available now for Visa/MC prepaid debit cards(2013-2016).
Apr 8, 2013, 1:55 pm
#211
Join Date: Jan 2010
Location: Minneapolis
Programs: DL, HH, SPG, AMEX
Posts: 61
Doesn't that work out to: $30,000 spend/$500 per card*5.95 fee per card = 35700 cents/(15,000 bonus points + 60,714 pts for the 2X spend) = 0.47cpp, assuming free loads to BB?
Edit: i assumed you'd buy the 60th card at full value even though it's not needed to reach the $30K spend.
Edit: i assumed you'd buy the 60th card at full value even though it's not needed to reach the $30K spend.
Apr 8, 2013, 2:26 pm
#212
Moderator
Join Date: Jun 2003
Location: Miami, Mpls & London
Programs: AA & Marriott Perpetual Platinum; DL & HH Gold
Posts: 48,958
The purpose of the provision seems to be to prevent MasterCard and VISA issuers from forcing prepaid cards onto the signature-based verification networks which charge higher merchant transaction fees than their PIN-based networks.
You can read the law here:
http://www.bankersonline.com/regs/235/235-07.html
Last edited by mia; Apr 8, 2013 at 2:33 pm
Apr 8, 2013, 2:35 pm
#213
Join Date: Apr 2013
Posts: 120
fyi, usbank issued visa GC worked to pay car payment by debit card to bmw financial services. specified that debit was on NYCE network. great for people that are not ready for BB.
Apr 8, 2013, 2:37 pm
#214
Suspended
Join Date: Sep 2011
Posts: 147
Any experiences paying credit card bills with a money order? How about with debit card? 
Apr 8, 2013, 3:40 pm
#217
Join Date: Apr 2013
Posts: 250
Seems to me people are having more success with gift cards issued by MetaBank than US Bank.
Apr 8, 2013, 3:56 pm
#218
Join Date: Mar 2013
Location: Down South, The Desert
Programs: Marriot Rewards, Southwest Rapid rewards, Emerald Club, Avis Preferred
Posts: 1,871
Apr 8, 2013, 4:20 pm
#220
Join Date: Feb 2013
Location: Atlanta (most of the time)
Posts: 285
Regarding purchases at Kroger.
So far only the Visa variable load $20-$500 works. The Mastercard version doesn't work to load BB.
I have not tried the fixed amount cards.
-Pointsloop
So far only the Visa variable load $20-$500 works. The Mastercard version doesn't work to load BB.
I have not tried the fixed amount cards.
-Pointsloop
Apr 8, 2013, 4:32 pm
#222
Join Date: Sep 2012
Location: Florida
Posts: 448
My experiment today:
1. I bought a $500 variable MC (I usually get Visa but they were out.) and a $100 fixed amount Visa. Kroger has a buy 2 MC or Visa or combo for $5.00 back coupon.
2. Called and had pins assigned to each.
3. Went to Walmart and asked to have the $500 put on my Bluebird. It never asked if I wanted to debit or credit and of course declined. The nice girl then tried to do it manually by saying it was a debit card, still no go.
4. Went to self-checkout and bought some eyeglass cleaner, I used the $100 visa and choose debit and voila it worked and got cash back also.
5. Bought a candy bar and used the $500 MC and picked debit but it went through as a credit.
Both cards are from US bank. I have had trouble with MC before trying to liquidate them so I usually buy Visa. I will go back to another Kroger tomorrow and see if they have The $500 Visa and try again.
I hope this info helps somebody in their experiments.
1. I bought a $500 variable MC (I usually get Visa but they were out.) and a $100 fixed amount Visa. Kroger has a buy 2 MC or Visa or combo for $5.00 back coupon.
2. Called and had pins assigned to each.
3. Went to Walmart and asked to have the $500 put on my Bluebird. It never asked if I wanted to debit or credit and of course declined. The nice girl then tried to do it manually by saying it was a debit card, still no go.
4. Went to self-checkout and bought some eyeglass cleaner, I used the $100 visa and choose debit and voila it worked and got cash back also.
5. Bought a candy bar and used the $500 MC and picked debit but it went through as a credit.
Both cards are from US bank. I have had trouble with MC before trying to liquidate them so I usually buy Visa. I will go back to another Kroger tomorrow and see if they have The $500 Visa and try again.
I hope this info helps somebody in their experiments.
Could you also add 1 more test? Try using the Visa to load BB. Even if it's just using the $100 fixed value card, that would be good to know too.
Also, what bank are the Visa & MC issued by? Seems Metabank is much more of a sure thing...are either the Visa or MC from Metabank?
Apr 8, 2013, 5:11 pm
#224
Join Date: Jun 2012
Posts: 86
Not to throw a wrench in, but both of the variable load Visa I bought from Kroger were US Bank.
They both loaded to BB perfectly at Walmart.
I'm wondering if it depends more on the Walmart than the issuing bank?
EDIT: Sounds like there might be problems with the MC cards from US Bank, but Visa is OK?
They both loaded to BB perfectly at Walmart.
I'm wondering if it depends more on the Walmart than the issuing bank?
EDIT: Sounds like there might be problems with the MC cards from US Bank, but Visa is OK?
Last edited by Aerosfire; Apr 8, 2013 at 5:17 pm
Apr 8, 2013, 5:15 pm
#225
Join Date: Apr 2010
Location: LAX
Posts: 546
Please let me know if this is way too much info for FT, I will delete this post. I am hoping that all of you can go through at least a portion of this FAQ and extract relevant info for all us. This might help us understand where the prepaid market is going.
I am going to summarize the finds in next post.
Frequently Asked Questions About Regulation II (Debit Card Interchange Fees and Routing)
Staff of the Board of Governors of the Federal Reserve System has developed the following Frequently Asked Questions (FAQs) to assist entities in complying with the Board's Regulation II. These FAQs are not official interpretations of the Board of Governors. These FAQs illustrate how select provisions of the regulation apply to specific situations an entity may confront. However, they do not necessarily address all provisions that may apply to any given situation. Staff may supplement or revise these FAQs as necessary or appropriate in light of further questions and experience.
§235.2 Definitions
235.2(i) General-use prepaid card
Q1. For a card to be considered issued "in exchange for payment," must the issuer charge a fee in addition to the amount of funds loaded onto the card?
A1. No. A card is issued "in exchange for payment" if a cardholder or other person provides funds to load on the card. The issuer or program manager need not charge an additional fee for issuance of the card to meet the "in exchange for payment" standard. (Added September 14, 2011)
Q2. Is a card considered a "general-use prepaid card" if the cardholder is not charged a fee for the card and receives the card prior to funds being loaded on the card?
A2. Yes. A "general-use prepaid card" includes a card that is provided to the cardholder without underlying funds and for which the issuer authorizes use of funds that are subsequently loaded on the card. (Added October 24, 2011)
Q3. For a card to be considered a general-use prepaid card, must the cardholder be the person that pays for or loads funds onto the card?
A3. No. A general-use prepaid card includes a card that is issued in exchange for payment made by a person other than the cardholder. (Added September 14, 2011)
Q4. Is a card considered a "general-use prepaid card" if the card may be used to redeem multiple promotional offers loaded onto the card that are provided by multiple unaffiliated merchants but where each particular offer loaded onto the card is redeemable only at a particular merchant?
A4. No. The definition of "general-use prepaid card" in § 235.2(i) of Regulation II requires the card to be redeemable upon presentation at multiple, unaffiliated merchants for goods or services. A card that may be used to redeem multiple promotional offers but where each particular offer is redeemable only at a single merchant or group of affiliated merchants is not considered a "general-use prepaid card." (Added October 24, 2011)
§ 235.3 Interchange Fee Standards
Q1. For purposes of § 235.3, what fees paid by a merchant or acquirer may be passed from a network to an issuer as an "interchange transaction fee"?
A1. As defined in § 235.2(j), an "interchange transaction fee" is a fee paid by a merchant or acquirer for the purpose of compensating an issuer for its involvement in an electronic debit transaction. For purposes of the definition, the issuer that is compensated through an interchange transaction fee is the issuer of the card used in the electronic debit transaction for which the fee is charged. Any fee charged by a payment card network with respect to an electronic debit transaction other than an interchange transaction fee is a network fee (EFTA Section 920(c), 15 U.S.C. 1693o-2(c)). Such network fees that are passed on to an issuer must be included in the calculation of net compensation for purposes of the net compensation prohibition in § 235.6(b) of Regulation II. (Added October 24, 2011)
§235.5 Exemptions
235.5(a) Small Issuer Exemption
Q1. If an issuer with consolidated assets of $10 billion or more as of the end of the preceding calendar year acquires an issuer with consolidated assets of less than $10 billion as of the end of the preceding calendar year, by when must the acquiring issuer comply with the interchange fee standards for transactions initiated using cards issued by the previously exempt issuer?
A1. Board staff would not recommend that the Board take any administrative action against institutions it supervises for noncompliance so long as the non-exempt issuer complies with the interchange fee standards with respect to the previously exempt cards as soon as reasonably practicable, but generally no later than 30 days after the date the non-exempt issuer acquires the previously exempt issuer. Section 235.5(a) exempts from the interchange fee standards issuers that hold the account being debited and have consolidated assets of less than $10 billion as of the end of the calendar year preceding the date of the electronic debit transaction for which the interchange fee is charged or received. Where an exempt issuer ceases to be a legal entity after acquisition, the acquiring entity becomes the issuer of the previously exempt debit cards. (Added October 24, 2011)
235.5(b) Government-Administered Payment Program Exemption
Q1. Is a card provided by a university in order to distribute Federal or state financial aid funds to a student considered to be issued "pursuant to a government-administered payment program"?
A1. Not necessarily. A payment program is not a "government-administered payment program" merely because the entity distributing the card receives funding from a government agency. A Federal or state financial aid program, however, would be considered "government-administered" for purposes of § 235.5(b)'s exemption from the interchange fee standards if the Federal or state agency making payments to beneficiaries has agreed to permit another entity (e.g., a college or university) to distribute payments to beneficiaries on behalf of the government or government agency. (Added October 24, 2011)
235.5(c) General-Use Prepaid Card Exemption
Q1. Are there any restrictions on the methods that may be used to load and reload funds onto a card in order for the card to be eligible for the general-use reloadable prepaid card exemption?
A1. The criteria for the general-use prepaid card exemption do not restrict the methods that cardholders or other persons may use to load or reload funds onto a card. General-use prepaid cards are eligible for the exemption from interchange fee standards regardless of whether funds may be loaded onto the card using ACH, check, cash, or other methods. However, some funds-loading arrangements may warrant additional supervisory scrutiny to determine whether circumvention or evasion is occurring. One example is where prepaid cards are linked to an issuer's customers' transaction accounts such that funds may be swept from the transaction accounts to the prepaid accounts as needed to cover transactions. See paragraph 6(a)-2.ii of the commentary to Regulation II. (Added September 14, 2011)
Q2. Section 235.5(c) provides that a general-use prepaid card is exempt from the interchange fee standards if, among other things, the card is "the only means of access to the underlying funds, except when all remaining funds are provided to the cardholder in a single transaction." Would a general-use prepaid card qualify for the exemption if a cardholder is able to use information from the card to make a payment on a merchant's website?
A2. Yes. A general-use prepaid card is eligible for the general-use prepaid card exemption in § 235.5(c) if a cardholder is able to use the card number to initiate a debit to funds underlying the prepaid card to pay a merchant or other payee on the merchant's or other payee's website, provided the card meets the other criteria for the exemption. For example, the cardholder may enter the card number on the merchant's or other payee's website to initiate a one-time payment or to authorize the merchant or other payee to initiate recurring payments. (But see Q7 of this section). (Revised March 13, 2013)
Q3. Would a general-use prepaid card qualify for the exemption in § 235.5(c) if the cardholder is able to authorize the issuer to pay third parties with funds underlying the card through the issuer's online card or account management system?
A3. No. If a cardholder is able to use the issuer's (or issuer's agent's) online card or account management system to authorize the issuer to pay a merchant or other payee from the cardholder's account or subaccount, then the card is not the only means of access to the underlying funds. For example, if a cardholder is able to pay a creditor by authorizing the issuer or issuer's agent to make electronic fund transfers out of an account, the card is not the only means of access to the underlying funds. (Added September 14, 2011)
Q4. Deleted. Not Applicable to FT
Q5. Deleted. Not Applicable to FT
Q6. Does a general-use prepaid card qualify for the exemption under § 235.5(c) if the issuer offers the cardholder the ability to obtain cash through the offices of a money transmitter service business by calling the issuer to authorize access, which then transfers money to the money transmitter service business?
A6. Such a card could qualify for the exemption under certain conditions. A general-use prepaid card would be the only means of access to funds underlying the card where the cardholder is able to initiate transfers out of the account to a money transmitter service business by contacting the issuer (or issuer's agent) via telephone and providing a card number for purposes of identifying the cardholder's account or subaccount, provided that only the cardholder may receive the transferred funds and the cardholder may receive the funds only as cash. (Added October 24, 2011)
Q7. Does a general-use prepaid card qualify for the exemption under § 235.5(c) if the issuer provides an account number and routing number to the cardholder for purposes of loading or facilitating loading funds onto the card through the ACH or otherwise? Does a general-use prepaid card qualify for the exemption if the cardholder may use the account number and routing number to authorize debits by non-card means, such as ACH debits, that access funds underlying the prepaid card?
A7. An issuer may provide a cardholder with an account number (which may or may not be different from the number on the card) and a routing number so that the cardholder may load funds (or authorize the loading of funds) by an ACH credit transaction or otherwise (e.g., a direct deposit from an employer or government agency), without the card becoming ineligible for the exemption under § 235.5(c). For such a general-use prepaid card to remain eligible for the exemption in § 235.5(c), an issuer must take steps to ensure that the cardholder does not use the account number or routing number to access or authorize access to the funds underlying the prepaid card through an ACH transaction or other non-card means. The issuer may, for example, conspicuously disclose to the cardholder that such use is prohibited. If the issuer becomes aware that the cardholder is violating this prohibition, however, the issuer must take further action to prevent the cardholder from using an account number and routing number to access, or authorize access to, funds through a debit transaction through non-card means (e.g., an ACH debit transaction) in order for the card remain eligible for the exemption under § 235.5(c). (Added March 13, 2013)
Q8. Does a general-use prepaid card qualify for the exemption under § 235.5(c) if a cardholder may present the card at a branch of the issuer to withdraw cash from the funds underlying the card?
A8. Yes. A general-use prepaid card is eligible for the general-use prepaid card exemption in § 235.5(c) if a cardholder is able to present the card at a branch of the issuer and withdraw cash from the funds underlying the card, provided the cardholder is the person receiving the cash. This is true whether the issuer sends the transaction information through the card network or effectuates the transaction without using the card network. (Added March 13, 2013)
Q9. If the issuer of a general-use prepaid card may settle the prepaid card transactions with the cardholder by initiating a debit transaction, such as an ACH debit, to another account of the cardholder, does the card qualify for the exemption in § 235.5(c)?
A9. No. If an issuer of a general-use prepaid card may settle transactions (either wholly or in part) with the cardholder by initiating debit transactions to another account (as defined in § 235.2(a)) of the cardholder instead of using prepaid funds underlying the card, the card is issued or approved for use to access an account held by or for the benefit of the cardholder and does not qualify for the exemption in § 235.5(c). (Added March 13, 2013)
Q10. If the issuer of a general-use prepaid card may, under standing instructions from the cardholder, reload funds onto the card by initiating a debit transaction, such as an ACH debit, to another account of the cardholder, does the card qualify for the exemption in § 235.5(c)?
A10. No. If an issuer is able to reload a prepaid card by initiating debit transactions to another account (as defined in § 235.2(a)) of the cardholder under standing instructions from the cardholder (e.g., if the prepaid card balance falls below a specified amount), the card is issued or approved for use to access an account held by or for the benefit of the cardholder and does not qualify for the exemption in § 235.5(c). (Added March 13, 2013)
235.5(d) Exceptions to Exemptions from the Interchange Fee Standards
Q1. Beginning on July 21, 2012, if an ATM fee or an overdraft fee is charged inadvertently to a cardholder of one card in a prepaid card program, will all cards in that program lose their exemption?
A1. Not necessarily. Section 235.5(d) provides that, beginning July 21, 2012, debit card transactions initiated using a general-use prepaid card that otherwise qualifies for the exemption under § 235.5(c) from the interchange fee standards will no longer be exempt if certain fees may be charged to a cardholder with respect to the debit card used to initiate the transaction. Accordingly, if an issuer develops and implements a policy reasonably designed to prevent charging to cardholders the fees prohibited under § 235.5(d) and implements that policy using procedures reasonably designed to ensure compliance, neither the card for which the fee was charged nor the other cards in the program will lose their exemption from the fee standards merely because an issuer inadvertently charged a prohibited fee to a cardholder. (Added October 24, 2011)
§ 235.6 Prohibition on circumvention, evasion, and net compensation
235.6(b) Prohibition on net compensation
Q1. Section 235.6(b) prohibits an issuer from receiving net compensation from a payment card network with respect to electronic debit transactions or debit card-related activities within a calendar year. To determine whether an issuer has received net compensation, must an issuer count the entire amount of a payment or incentive received from a network or made to a network at the time that the payment is received or made? Or, may an issuer count payments as they are earned by the network or issuer?
A1. An issuer may use any reasonable consistently-applied method of allocating and accounting for payments and incentives received from a payment card network and fees paid by the issuer to the network. For example, an issuer may account for compensation when the compensation is earned (i.e., on an accrual basis) rather than when the compensation is paid (i.e., on a cash basis). (Added September 14, 2011)
Q2. The final rule becomes effective on October 1, 2011. How should an issuer allocate payments and incentives for purposes of determining whether the issuer received net compensation in calendar year 2011?
A2. The prohibition on net compensation applies only to those payments and incentives received, and fees paid, on or after October 1, 2011. If an issuer receives an incentive payment in December 2011 for that issuer's debit card-related activities during all of calendar 2011, the issuer may choose a reasonable method for allocating the incentive payment between the first 9 months of 2011 and the last 3 months of 2011. (Added September 14, 2011)
Q3. Does compensation from contracts entered into prior to October 1, 2011, count for purposes of the prohibition on net compensation?
A3. Payments (including incentive payments and rebates) made by a payment card network or issuer on or after October 1, 2011, are included in the net compensation test, even if the payments are made pursuant to contracts entered into prior to October 1, 2011. Issuers and networks may have to renegotiate contracts if obligations under these contracts would result in the issuer receiving net compensation from the network under § 235.6(b). (Added September 14, 2011)
Q4. If a contract is longer than one year or covers non-debit card-related activities, what methods are permissible for allocating payments and incentives for purposes of determining whether an issuer has received net compensation?
A4. An issuer may use any reasonable method for allocating payments and incentives if the payments and incentives are for multi-year contracts or multi-product contracts. The reasonableness of a particular method will depend on the particular structure of the payments and incentives. For example, in some circumstances, it may be reasonable for an issuer to allocate the total payments and incentives in a multi-year contract to a calendar year pro rata based on the number of years in the contract; in other circumstances, it may be reasonable to use another basis for allocation. For a multi-product incentive payment contract, it may be reasonable for an issuer to allocate payments and incentives to debit card-related activities based on the proportion of the cards or transactions covered by the contract that are debit cards or electronic debit transactions. See paragraphs 6(b)-2.i and ii in the commentary to Regulation II. (Added September 14, 2011)
Q5. If a payment card network rebates some or all of an issuer's switch fees or other network processing fees (e.g., because an issuer reached a certain transaction volume), is the rebate for the switch fee or other processing fee excluded for purposes of determining whether the issuer has received net compensation?
A5. In general, rebates (including those for network processing fees) received by an issuer from a payment card network are included as compensation for purposes of determining whether the issuer has received net compensation, regardless of the purpose for which the rebate is received. If, however, the network or network's affiliate provides optional issuer-processor services performed on behalf of the issuer, and the network or network's affiliate provides a rebate on fees for those services, that rebate is not included for purposes of determining whether the issuer has received net compensation. See paragraph 6(b)-2 in the commentary to Regulation II. (Added September 14, 2011)
Q6. May a payment card network offset fees for optional services provided to issuers related to electronic debit transactions or debit card-related activities with payments and incentives paid to the issuer related to electronic debit transactions or debit card-related activities, so that, for example, no fee actually is charged to issuers for the services?
A6. A payment card network may use any method of charging its issuers for optional network services and distributing payments and incentives that is reasonable given the facts and circumstances. For example, a payment card network may charge an issuer for optional network services and subsequently provide an incentive payment to the issuer. Alternatively, a payment card network may offset the fees owed by the issuer for the optional service against any incentive payments owed to the issuer prior to charging the issuer. A payment card network's pricing of optional services should be reasonable and should not be a means to circumvent the prohibition on net compensation. (Added September 14, 2011)
Q7. Do payments made by a network to an issuer to compensate an issuer for banking services provided by the issuer to the network count for purposes of determining whether an issuer has received net compensation?
A7. No. If an issuer acts as the network's bank, payments made by a payment card network to an issuer for banking services (e.g., transaction account services) provided to the network are not considered compensation for purposes of determining whether an issuer has received net compensation from a payment card network. Such payments relate to the issuer's role as the network's bank rather than to debit card-related services provided by the issuer. (Added September 14, 2011)
Q8. Are payments from a network to an issuer for products or services the issuer provides to the network included under the net compensation test?
A8. Not necessarily. Except as otherwise provided in the rule and commentary, if a network purchases from an issuer a product or service, such as an issuer's analysis of transaction patterns across multiple issuers, payment for those goods or services are not subject to the prohibition on net compensation in § 235.6(b) merely because the product or service is connected to debit cards in general. The issuer's pricing of its services should be reasonable and should not be a means to circumvent the interchange fee standards. (See also § 235.6(b) Q7 with respect to banking services provided by issuers to networks.) By contrast, network payments, such as fees or other incentives or bonuses that are specific to the issuer's debit card transactions or debit card activities (such as marketing the network's brand of debit cards or converting the issuer's card base to the network's brand) are subject to the prohibition on net compensation. See comment 6(b)-2.i. (Added October 24, 2011)
Q9. Does the net compensation test cover incentives and other payments related to exempt debit card transactions?
A9. No. The prohibition against net compensation does not apply to issuers or electronic debit transactions that qualify for an exemption under § 235.5 from the interchange fee standards. See comment 6-1. An issuer may use any reasonable method for allocating the payments between exempt and non-exempt transactions. (Added October 24, 2011)
§ 235.7 Network Exclusivity and Routing Provisions
Q1. Does a debit card comply with the provisions in § 235.7 if the card is enabled for processing transactions over two unaffiliated card networks but, once the card is swiped, the transaction is required to be authenticated using a specific authentication technology available only through one network enabled on the card?
A1. No. Section 235.7(b) prohibits an issuer or a network from inhibiting the ability of any person that accepts or honors debit cards for payments to direct the routing of electronic debit transactions for processing over any payment card network that may process such transactions. If an electronic debit transaction initiated using a debit card enabled for certain authentication technology (e.g., a chip) must, once the card is swiped at the point of sale, be processed over a specific payment card network, that debit card does not comply with the prohibition on merchant routing restrictions under § 235.7(b) if the merchant is unable to direct the cardholder to authenticate the transaction so that it may be processed over at least one other unaffiliated network enabled on the card. (Added October 24, 2011)
Q2. 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 permit activation of the PIN at the time the prepaid card is purchased for the card to comply with § 235.7(a)?
A2. An issuer complies with § 235.7(a)'s prohibition on network exclusivity only if card transactions can be processed over both unaffiliated networks on the card. Transactions can be processed over a 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 may comply by activating the card at the time of purchase and providing a PIN at that time or by activating the card by telephone subsequent to purchase and providing a PIN at the time of activation. (Added March 13, 2013)
I am going to summarize the finds in next post.
Frequently Asked Questions About Regulation II (Debit Card Interchange Fees and Routing)
Staff of the Board of Governors of the Federal Reserve System has developed the following Frequently Asked Questions (FAQs) to assist entities in complying with the Board's Regulation II. These FAQs are not official interpretations of the Board of Governors. These FAQs illustrate how select provisions of the regulation apply to specific situations an entity may confront. However, they do not necessarily address all provisions that may apply to any given situation. Staff may supplement or revise these FAQs as necessary or appropriate in light of further questions and experience.
§235.2 Definitions
235.2(i) General-use prepaid card
Q1. For a card to be considered issued "in exchange for payment," must the issuer charge a fee in addition to the amount of funds loaded onto the card?
A1. No. A card is issued "in exchange for payment" if a cardholder or other person provides funds to load on the card. The issuer or program manager need not charge an additional fee for issuance of the card to meet the "in exchange for payment" standard. (Added September 14, 2011)
Q2. Is a card considered a "general-use prepaid card" if the cardholder is not charged a fee for the card and receives the card prior to funds being loaded on the card?
A2. Yes. A "general-use prepaid card" includes a card that is provided to the cardholder without underlying funds and for which the issuer authorizes use of funds that are subsequently loaded on the card. (Added October 24, 2011)
Q3. For a card to be considered a general-use prepaid card, must the cardholder be the person that pays for or loads funds onto the card?
A3. No. A general-use prepaid card includes a card that is issued in exchange for payment made by a person other than the cardholder. (Added September 14, 2011)
Q4. Is a card considered a "general-use prepaid card" if the card may be used to redeem multiple promotional offers loaded onto the card that are provided by multiple unaffiliated merchants but where each particular offer loaded onto the card is redeemable only at a particular merchant?
A4. No. The definition of "general-use prepaid card" in § 235.2(i) of Regulation II requires the card to be redeemable upon presentation at multiple, unaffiliated merchants for goods or services. A card that may be used to redeem multiple promotional offers but where each particular offer is redeemable only at a single merchant or group of affiliated merchants is not considered a "general-use prepaid card." (Added October 24, 2011)
§ 235.3 Interchange Fee Standards
Q1. For purposes of § 235.3, what fees paid by a merchant or acquirer may be passed from a network to an issuer as an "interchange transaction fee"?
A1. As defined in § 235.2(j), an "interchange transaction fee" is a fee paid by a merchant or acquirer for the purpose of compensating an issuer for its involvement in an electronic debit transaction. For purposes of the definition, the issuer that is compensated through an interchange transaction fee is the issuer of the card used in the electronic debit transaction for which the fee is charged. Any fee charged by a payment card network with respect to an electronic debit transaction other than an interchange transaction fee is a network fee (EFTA Section 920(c), 15 U.S.C. 1693o-2(c)). Such network fees that are passed on to an issuer must be included in the calculation of net compensation for purposes of the net compensation prohibition in § 235.6(b) of Regulation II. (Added October 24, 2011)
§235.5 Exemptions
235.5(a) Small Issuer Exemption
Q1. If an issuer with consolidated assets of $10 billion or more as of the end of the preceding calendar year acquires an issuer with consolidated assets of less than $10 billion as of the end of the preceding calendar year, by when must the acquiring issuer comply with the interchange fee standards for transactions initiated using cards issued by the previously exempt issuer?
A1. Board staff would not recommend that the Board take any administrative action against institutions it supervises for noncompliance so long as the non-exempt issuer complies with the interchange fee standards with respect to the previously exempt cards as soon as reasonably practicable, but generally no later than 30 days after the date the non-exempt issuer acquires the previously exempt issuer. Section 235.5(a) exempts from the interchange fee standards issuers that hold the account being debited and have consolidated assets of less than $10 billion as of the end of the calendar year preceding the date of the electronic debit transaction for which the interchange fee is charged or received. Where an exempt issuer ceases to be a legal entity after acquisition, the acquiring entity becomes the issuer of the previously exempt debit cards. (Added October 24, 2011)
235.5(b) Government-Administered Payment Program Exemption
Q1. Is a card provided by a university in order to distribute Federal or state financial aid funds to a student considered to be issued "pursuant to a government-administered payment program"?
A1. Not necessarily. A payment program is not a "government-administered payment program" merely because the entity distributing the card receives funding from a government agency. A Federal or state financial aid program, however, would be considered "government-administered" for purposes of § 235.5(b)'s exemption from the interchange fee standards if the Federal or state agency making payments to beneficiaries has agreed to permit another entity (e.g., a college or university) to distribute payments to beneficiaries on behalf of the government or government agency. (Added October 24, 2011)
235.5(c) General-Use Prepaid Card Exemption
Q1. Are there any restrictions on the methods that may be used to load and reload funds onto a card in order for the card to be eligible for the general-use reloadable prepaid card exemption?
A1. The criteria for the general-use prepaid card exemption do not restrict the methods that cardholders or other persons may use to load or reload funds onto a card. General-use prepaid cards are eligible for the exemption from interchange fee standards regardless of whether funds may be loaded onto the card using ACH, check, cash, or other methods. However, some funds-loading arrangements may warrant additional supervisory scrutiny to determine whether circumvention or evasion is occurring. One example is where prepaid cards are linked to an issuer's customers' transaction accounts such that funds may be swept from the transaction accounts to the prepaid accounts as needed to cover transactions. See paragraph 6(a)-2.ii of the commentary to Regulation II. (Added September 14, 2011)
Q2. Section 235.5(c) provides that a general-use prepaid card is exempt from the interchange fee standards if, among other things, the card is "the only means of access to the underlying funds, except when all remaining funds are provided to the cardholder in a single transaction." Would a general-use prepaid card qualify for the exemption if a cardholder is able to use information from the card to make a payment on a merchant's website?
A2. Yes. A general-use prepaid card is eligible for the general-use prepaid card exemption in § 235.5(c) if a cardholder is able to use the card number to initiate a debit to funds underlying the prepaid card to pay a merchant or other payee on the merchant's or other payee's website, provided the card meets the other criteria for the exemption. For example, the cardholder may enter the card number on the merchant's or other payee's website to initiate a one-time payment or to authorize the merchant or other payee to initiate recurring payments. (But see Q7 of this section). (Revised March 13, 2013)
Q3. Would a general-use prepaid card qualify for the exemption in § 235.5(c) if the cardholder is able to authorize the issuer to pay third parties with funds underlying the card through the issuer's online card or account management system?
A3. No. If a cardholder is able to use the issuer's (or issuer's agent's) online card or account management system to authorize the issuer to pay a merchant or other payee from the cardholder's account or subaccount, then the card is not the only means of access to the underlying funds. For example, if a cardholder is able to pay a creditor by authorizing the issuer or issuer's agent to make electronic fund transfers out of an account, the card is not the only means of access to the underlying funds. (Added September 14, 2011)
Q4. Deleted. Not Applicable to FT
Q5. Deleted. Not Applicable to FT
Q6. Does a general-use prepaid card qualify for the exemption under § 235.5(c) if the issuer offers the cardholder the ability to obtain cash through the offices of a money transmitter service business by calling the issuer to authorize access, which then transfers money to the money transmitter service business?
A6. Such a card could qualify for the exemption under certain conditions. A general-use prepaid card would be the only means of access to funds underlying the card where the cardholder is able to initiate transfers out of the account to a money transmitter service business by contacting the issuer (or issuer's agent) via telephone and providing a card number for purposes of identifying the cardholder's account or subaccount, provided that only the cardholder may receive the transferred funds and the cardholder may receive the funds only as cash. (Added October 24, 2011)
Q7. Does a general-use prepaid card qualify for the exemption under § 235.5(c) if the issuer provides an account number and routing number to the cardholder for purposes of loading or facilitating loading funds onto the card through the ACH or otherwise? Does a general-use prepaid card qualify for the exemption if the cardholder may use the account number and routing number to authorize debits by non-card means, such as ACH debits, that access funds underlying the prepaid card?
A7. An issuer may provide a cardholder with an account number (which may or may not be different from the number on the card) and a routing number so that the cardholder may load funds (or authorize the loading of funds) by an ACH credit transaction or otherwise (e.g., a direct deposit from an employer or government agency), without the card becoming ineligible for the exemption under § 235.5(c). For such a general-use prepaid card to remain eligible for the exemption in § 235.5(c), an issuer must take steps to ensure that the cardholder does not use the account number or routing number to access or authorize access to the funds underlying the prepaid card through an ACH transaction or other non-card means. The issuer may, for example, conspicuously disclose to the cardholder that such use is prohibited. If the issuer becomes aware that the cardholder is violating this prohibition, however, the issuer must take further action to prevent the cardholder from using an account number and routing number to access, or authorize access to, funds through a debit transaction through non-card means (e.g., an ACH debit transaction) in order for the card remain eligible for the exemption under § 235.5(c). (Added March 13, 2013)
Q8. Does a general-use prepaid card qualify for the exemption under § 235.5(c) if a cardholder may present the card at a branch of the issuer to withdraw cash from the funds underlying the card?
A8. Yes. A general-use prepaid card is eligible for the general-use prepaid card exemption in § 235.5(c) if a cardholder is able to present the card at a branch of the issuer and withdraw cash from the funds underlying the card, provided the cardholder is the person receiving the cash. This is true whether the issuer sends the transaction information through the card network or effectuates the transaction without using the card network. (Added March 13, 2013)
Q9. If the issuer of a general-use prepaid card may settle the prepaid card transactions with the cardholder by initiating a debit transaction, such as an ACH debit, to another account of the cardholder, does the card qualify for the exemption in § 235.5(c)?
A9. No. If an issuer of a general-use prepaid card may settle transactions (either wholly or in part) with the cardholder by initiating debit transactions to another account (as defined in § 235.2(a)) of the cardholder instead of using prepaid funds underlying the card, the card is issued or approved for use to access an account held by or for the benefit of the cardholder and does not qualify for the exemption in § 235.5(c). (Added March 13, 2013)
Q10. If the issuer of a general-use prepaid card may, under standing instructions from the cardholder, reload funds onto the card by initiating a debit transaction, such as an ACH debit, to another account of the cardholder, does the card qualify for the exemption in § 235.5(c)?
A10. No. If an issuer is able to reload a prepaid card by initiating debit transactions to another account (as defined in § 235.2(a)) of the cardholder under standing instructions from the cardholder (e.g., if the prepaid card balance falls below a specified amount), the card is issued or approved for use to access an account held by or for the benefit of the cardholder and does not qualify for the exemption in § 235.5(c). (Added March 13, 2013)
235.5(d) Exceptions to Exemptions from the Interchange Fee Standards
Q1. Beginning on July 21, 2012, if an ATM fee or an overdraft fee is charged inadvertently to a cardholder of one card in a prepaid card program, will all cards in that program lose their exemption?
A1. Not necessarily. Section 235.5(d) provides that, beginning July 21, 2012, debit card transactions initiated using a general-use prepaid card that otherwise qualifies for the exemption under § 235.5(c) from the interchange fee standards will no longer be exempt if certain fees may be charged to a cardholder with respect to the debit card used to initiate the transaction. Accordingly, if an issuer develops and implements a policy reasonably designed to prevent charging to cardholders the fees prohibited under § 235.5(d) and implements that policy using procedures reasonably designed to ensure compliance, neither the card for which the fee was charged nor the other cards in the program will lose their exemption from the fee standards merely because an issuer inadvertently charged a prohibited fee to a cardholder. (Added October 24, 2011)
§ 235.6 Prohibition on circumvention, evasion, and net compensation
235.6(b) Prohibition on net compensation
Q1. Section 235.6(b) prohibits an issuer from receiving net compensation from a payment card network with respect to electronic debit transactions or debit card-related activities within a calendar year. To determine whether an issuer has received net compensation, must an issuer count the entire amount of a payment or incentive received from a network or made to a network at the time that the payment is received or made? Or, may an issuer count payments as they are earned by the network or issuer?
A1. An issuer may use any reasonable consistently-applied method of allocating and accounting for payments and incentives received from a payment card network and fees paid by the issuer to the network. For example, an issuer may account for compensation when the compensation is earned (i.e., on an accrual basis) rather than when the compensation is paid (i.e., on a cash basis). (Added September 14, 2011)
Q2. The final rule becomes effective on October 1, 2011. How should an issuer allocate payments and incentives for purposes of determining whether the issuer received net compensation in calendar year 2011?
A2. The prohibition on net compensation applies only to those payments and incentives received, and fees paid, on or after October 1, 2011. If an issuer receives an incentive payment in December 2011 for that issuer's debit card-related activities during all of calendar 2011, the issuer may choose a reasonable method for allocating the incentive payment between the first 9 months of 2011 and the last 3 months of 2011. (Added September 14, 2011)
Q3. Does compensation from contracts entered into prior to October 1, 2011, count for purposes of the prohibition on net compensation?
A3. Payments (including incentive payments and rebates) made by a payment card network or issuer on or after October 1, 2011, are included in the net compensation test, even if the payments are made pursuant to contracts entered into prior to October 1, 2011. Issuers and networks may have to renegotiate contracts if obligations under these contracts would result in the issuer receiving net compensation from the network under § 235.6(b). (Added September 14, 2011)
Q4. If a contract is longer than one year or covers non-debit card-related activities, what methods are permissible for allocating payments and incentives for purposes of determining whether an issuer has received net compensation?
A4. An issuer may use any reasonable method for allocating payments and incentives if the payments and incentives are for multi-year contracts or multi-product contracts. The reasonableness of a particular method will depend on the particular structure of the payments and incentives. For example, in some circumstances, it may be reasonable for an issuer to allocate the total payments and incentives in a multi-year contract to a calendar year pro rata based on the number of years in the contract; in other circumstances, it may be reasonable to use another basis for allocation. For a multi-product incentive payment contract, it may be reasonable for an issuer to allocate payments and incentives to debit card-related activities based on the proportion of the cards or transactions covered by the contract that are debit cards or electronic debit transactions. See paragraphs 6(b)-2.i and ii in the commentary to Regulation II. (Added September 14, 2011)
Q5. If a payment card network rebates some or all of an issuer's switch fees or other network processing fees (e.g., because an issuer reached a certain transaction volume), is the rebate for the switch fee or other processing fee excluded for purposes of determining whether the issuer has received net compensation?
A5. In general, rebates (including those for network processing fees) received by an issuer from a payment card network are included as compensation for purposes of determining whether the issuer has received net compensation, regardless of the purpose for which the rebate is received. If, however, the network or network's affiliate provides optional issuer-processor services performed on behalf of the issuer, and the network or network's affiliate provides a rebate on fees for those services, that rebate is not included for purposes of determining whether the issuer has received net compensation. See paragraph 6(b)-2 in the commentary to Regulation II. (Added September 14, 2011)
Q6. May a payment card network offset fees for optional services provided to issuers related to electronic debit transactions or debit card-related activities with payments and incentives paid to the issuer related to electronic debit transactions or debit card-related activities, so that, for example, no fee actually is charged to issuers for the services?
A6. A payment card network may use any method of charging its issuers for optional network services and distributing payments and incentives that is reasonable given the facts and circumstances. For example, a payment card network may charge an issuer for optional network services and subsequently provide an incentive payment to the issuer. Alternatively, a payment card network may offset the fees owed by the issuer for the optional service against any incentive payments owed to the issuer prior to charging the issuer. A payment card network's pricing of optional services should be reasonable and should not be a means to circumvent the prohibition on net compensation. (Added September 14, 2011)
Q7. Do payments made by a network to an issuer to compensate an issuer for banking services provided by the issuer to the network count for purposes of determining whether an issuer has received net compensation?
A7. No. If an issuer acts as the network's bank, payments made by a payment card network to an issuer for banking services (e.g., transaction account services) provided to the network are not considered compensation for purposes of determining whether an issuer has received net compensation from a payment card network. Such payments relate to the issuer's role as the network's bank rather than to debit card-related services provided by the issuer. (Added September 14, 2011)
Q8. Are payments from a network to an issuer for products or services the issuer provides to the network included under the net compensation test?
A8. Not necessarily. Except as otherwise provided in the rule and commentary, if a network purchases from an issuer a product or service, such as an issuer's analysis of transaction patterns across multiple issuers, payment for those goods or services are not subject to the prohibition on net compensation in § 235.6(b) merely because the product or service is connected to debit cards in general. The issuer's pricing of its services should be reasonable and should not be a means to circumvent the interchange fee standards. (See also § 235.6(b) Q7 with respect to banking services provided by issuers to networks.) By contrast, network payments, such as fees or other incentives or bonuses that are specific to the issuer's debit card transactions or debit card activities (such as marketing the network's brand of debit cards or converting the issuer's card base to the network's brand) are subject to the prohibition on net compensation. See comment 6(b)-2.i. (Added October 24, 2011)
Q9. Does the net compensation test cover incentives and other payments related to exempt debit card transactions?
A9. No. The prohibition against net compensation does not apply to issuers or electronic debit transactions that qualify for an exemption under § 235.5 from the interchange fee standards. See comment 6-1. An issuer may use any reasonable method for allocating the payments between exempt and non-exempt transactions. (Added October 24, 2011)
§ 235.7 Network Exclusivity and Routing Provisions
Q1. Does a debit card comply with the provisions in § 235.7 if the card is enabled for processing transactions over two unaffiliated card networks but, once the card is swiped, the transaction is required to be authenticated using a specific authentication technology available only through one network enabled on the card?
A1. No. Section 235.7(b) prohibits an issuer or a network from inhibiting the ability of any person that accepts or honors debit cards for payments to direct the routing of electronic debit transactions for processing over any payment card network that may process such transactions. If an electronic debit transaction initiated using a debit card enabled for certain authentication technology (e.g., a chip) must, once the card is swiped at the point of sale, be processed over a specific payment card network, that debit card does not comply with the prohibition on merchant routing restrictions under § 235.7(b) if the merchant is unable to direct the cardholder to authenticate the transaction so that it may be processed over at least one other unaffiliated network enabled on the card. (Added October 24, 2011)
Q2. 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 permit activation of the PIN at the time the prepaid card is purchased for the card to comply with § 235.7(a)?
A2. An issuer complies with § 235.7(a)'s prohibition on network exclusivity only if card transactions can be processed over both unaffiliated networks on the card. Transactions can be processed over a 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 may comply by activating the card at the time of purchase and providing a PIN at that time or by activating the card by telephone subsequent to purchase and providing a PIN at the time of activation. (Added March 13, 2013)