[Federal Register Volume 76, Number 245 (Wednesday, December 21, 2011)]
[Notices]
[Pages 79184-79190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32600]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
SUMMARY: Notice is hereby given of the final approval of four proposed
information collections by the Board of Governors of the Federal
Reserve System (Board) under OMB delegated authority, per 5 CFR 1320.16
(OMB Regulations on Controlling Paperwork Burdens on the Public).
Board-approved collections of information are incorporated into the
official OMB inventory of currently approved collections of
information. Copies of the Paperwork Reduction Act Submission,
supporting statements and approved collection of information
instrument(s) are placed into OMB's public docket files. The Federal
Reserve may not conduct or sponsor, and the respondent is not required
to respond to, an information collection that has been extended,
revised, or implemented on or after October 1, 1995, unless it displays
a currently valid OMB control number.
FOR FURTHER INFORMATION CONTACT: Jennifer Williams, Senior Financial
Services Analyst (202) 452-2446, Division of Reserve Bank Operations
and Payment Systems, Board of Governors of the Federal Reserve System,
Washington, DC 20551, for FR 3063a or b (government-administered,
general-use prepaid cards).
Edith Collis, Senior Financial Services Analyst (202) 452-3638,
Division of Reserve Bank Operations and Payment Systems, Board of
Governors of the Federal Reserve System, Washington, DC 20551, for FR
3064a (debit card issuers).
Linda Healey, Senior Financial Services Analyst (202) 452-5274,
Division of Reserve Bank Operations and Payment Systems, Board of
Governors of the Federal Reserve System, Washington, DC 20551, for FR
3064b (payment card networks).
[[Page 79185]]
Federal Reserve Board Clearance Officer--Cynthia Ayouch--Division of
Research and Statistics, Board of Governors of the Federal Reserve
System, Washington, DC 20551 (202) 452-3829 Telecommunications Device
for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors
of the Federal Reserve System, Washington, DC 20551.
OMB Desk Officer--Shagufta Ahmed--Office of Information and Regulatory
Affairs, Office of Management and Budget, New Executive Office
Building, Room 10235, 725 17th Street NW., Washington, DC 20503.
Final approval under OMB delegated authority of the implementation
of the following information collections:
1. Report title: Government-administered, General-use Prepaid Card
Surveys.\1\
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\1\ The issuer and government surveys, supporting statement, and
other documentation are available on the Board's public Web site at:
http://www.federalreserve.gov/boarddocs/reportforms/review.cfm.
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Agency form number: FR 3063a and FR 3063b.
OMB control number: 7100--to be assigned.
Frequency: Annual.
Reporters: Issuers of government-administered, general-use prepaid
cards (FR 3063a) and governments that administer general-use prepaid
cards (FR 3063b).
Estimated annual reporting hours: FR 3063a: 1,000 hours; FR 3063b:
900 hours.
Estimated average hours per response: FR 3063a: 50 hours; FR 3063b:
15 hours.
Number of respondents: FR 3063a: 20; FR 3063b: 60.
General description of report: These information collections are
authorized by section 920(a) of the Electronic Fund Transfer Act
(EFTA), which was added by section 1075(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank Act). 15 U.S.C.
1693o-2. EFTA Section 920(a) requires the Board to submit an annual
report to the Congress on the prevalence of the use of general-use
prepaid cards in federal, state, and local government-administered
payment programs, and the interchange transaction fees and card-holder
fees charged with respect to the use of such general-use prepaid cards.
15 U.S.C. 1693o-2(a)(7)(D). EFTA Section 920(a) also provides the Board
with authority to require issuers to provide information to enable the
Board to carry out the provisions of EFTA Section 920(a). 15 U.S.C.
1693o-2(a)(3)(B).
The obligation of issuers to respond to the issuer survey (FR
3063a) is mandatory. Some of the data collected by FR 3063a may be kept
confidential under exemption (b)(4) of the Freedom of Information Act
(FOIA), which exempts from disclosure ``trade secrets and commercial or
financial information obtained from a person and privileged or
confidential.'' 5 U.S.C. 552(b)(4). Information collected under FR
3063a can be kept confidential under exemption (b)(4) if the release of
data would cause substantial harm to the competitive position of the
issuer.
The obligation of government agencies to respond to the government
survey (FR 3063b) is voluntary. The Board anticipates that all of the
information collected by FR 3063b will be publicly available and would
not be given confidential treatment.
Abstract: Section 920 of the EFTA provides that the Board shall
provide annually a report to the Congress regarding the prevalence of
the use of general-use prepaid cards in federal, state, and local
government-administered payment programs, and the interchange and
cardholder fees charged with respect to this use. Section 920(a) also
provides the Board with authority to require card issuers to respond to
information requests as may be necessary to carry out the provisions of
the section.
Current Actions: On September 6, 2011, the Board approved a
proposal to seek comment on these surveys. Notice of the proposed
action was published in the Federal Register on September 15, 2011; the
comment period ended on November 14, 2011.\2\ The Board received eleven
comments in total addressing the proposed information collections. The
comments are summarized and addressed below.
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\2\ 76 FR 57037.
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2. Report title: Interchange Transaction Fees Surveys.\3\
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\3\ The debit card issuer and payment card network surveys,
supporting statement, and other documentation are available on the
Board's public Web site at: http://www.federalreserve.gov/boarddocs/reportforms/review.cfm.
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Agency form number: FR 3064a and FR 3064b.
OMB control number: 7100--to be assigned.
Frequency: FR 3064a--Biennial; FR 3064b--Annual.
Reporters: Issuers of debit cards (FR 3064a) and payment card
networks (FR 3064b).
Estimated annual reporting hours: FR 3064a: 92,800 hours; FR 3064b:
1,275 hours.
Estimated average hours per response: FR 3064a: 160 hours; FR
3064b: 75 hours.
Number of respondents: FR 3064a: 580; FR 3064b: 17.
General description of report: These information collections are
authorized by section 920(a) of the EFTA, which was added by section
1075(a) of the Dodd-Frank Act. 15 U.S.C. 1693o-2. This section requires
the Board to disclose aggregate or summary information concerning the
costs incurred and interchange transactions fees charged or received,
by issuers or payment card networks in connection with the
authorization, clearance, or settlement of electronic debit
transactions as the Board considers appropriate and in the public
interest. 15 U.S.C. 1693o-2(a)(3)(B). It also provides the Board with
authority to require issuers (or agents of issuers) and payment card
networks to provide information to enable the Board to carry out the
provisions of the section.
The obligation to respond to these surveys is mandatory. In
accordance with the statutory requirement, the Board will release
aggregate or summary information from the survey responses. Some of the
data collected by the surveys may be kept confidential under exemption
(b)(4) of the FOIA, which exempts from disclosure ``trade secrets and
commercial or financial information obtained from a person and
privileged or confidential.'' 5 U.S.C. Sec. 552(b)(4). Information
collected under the surveys can be kept confidential under exemption
(b)(4) if the release of data would cause substantial harm to the
competitive position of the respondent.
Abstract: Section 920(a)(3) of the EFTA provides that the Board
shall at least on a biennial basis disclose aggregate or summary
information concerning the costs incurred, and interchange transaction
fees charged or received, by issuers or payment card networks in
connection with debit card transactions. 15 U.S.C. 1693o-2(a)(3)(B).
When the Board adopted Regulation II setting debit card interchange fee
standards, the Board's rulemaking stated that information would be
gathered from payment card networks annually regarding interchange fees
that are received by covered and exempt issuers.\4\
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\4\ Regulation II--Debit Card Interchange Fees and Routing (76
FR 43394 (July 20, 2011)).
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Current Actions: On September 6, 2011, the Board approved a
proposal to seek comment on these surveys. Notice of the proposed
action was published in the Federal Register on September 15, 2011; the
comment period ended on November 14, 2011.\5\ The Board
[[Page 79186]]
received eleven comments in total addressing the proposed information
collections. The comments are summarized and addressed below.
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\5\ 76 FR 57037.
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Summary Discussion of Public Comments and Responses
The Board received comments from three financial institutions, two
banking industry trade associations, a joint letter from eight banking
industry associations (including the two associations that responded
separately), three payment card networks, one merchant, and one
merchant trade association. Some of the commenters' responses were
applicable to all four surveys. These comments addressed the clarity of
the instructions for the survey instruments, the confidentiality of
survey data, the follow-up process, and the survey timeframes.
Most commenters stated that certain aspects of the survey
instructions lacked sufficient clarity to allow for consistent
responses and meaningful aggregation. For example, for the proposed
debit card issuer survey (FR 3064a), three commenters stated that more
precise definitions and examples were needed to determine what costs
were included and excluded from ``authorization, clearance, and
settlement costs.'' In a few instances, the commenters provided
examples of how to improve the clarity and precision of the data
requested or definitions provided. The Board has taken steps to address
the specific examples cited and has provided improved and expanded
instructions, definitions, and examples throughout the surveys.
Two commenters expressed concern regarding the confidentiality of
survey data stating that, if released, individual issuer and payment
card information collected through these surveys would cause
substantial harm to the competitive position of the survey respondent.
As proposed, the Board will report all of the survey data on an
aggregate or summary basis. Individual institution data would be exempt
from disclosure under exemption (b)(4) of the FOIA, which exempts from
disclosure ``trade secrets and commercial or financial information
obtained from a person and privileged or confidential.'' 5 U.S.C.
552(b)(4).
Several commenters requested that the Board provide a follow-up
process between the survey respondents and the Board improve the
quality of the data received and increase the consistency of responses.
One commenter cited the need for a formal approach to answering
respondent questions and conducting follow-up interviews with
respondents after survey responses are submitted. Three commenters
stated the need for a post-survey reconciliation process to understand
better potential inconsistencies across responses. The Board concurs
with these comments and has decided to take the following steps. Each
survey provides contact information for the Board to answer respondent
questions during the completion period. The Board, as appropriate, may
use that correspondence to create frequently asked questions (FAQs).
The Board will also compare responses for completeness and consistency
and, as needed, follow up with respondents to reconcile responses that
seem inconsistent or in error.
Several commenters responded to the Board's request for comment on
whether the proposed timeframes for submission allow sufficient time
for respondents to complete the surveys. Five commenters recommended
all four surveys be administered simultaneously in mid-February with a
60-day completion period to allow ample time for internal review before
the surveys are submitted to the Board.\6\ The Board has decided to
adopt this approach for three of the four surveys: the debit card
issuer survey (FR 3064a), and both government-administered prepaid card
surveys (FR 3063a and b). Because the payment card network survey (FR
3064b) contains information necessary to evaluate the effectiveness of
the small issuer exemption in Regulation II and assist small issuers in
selecting payment card networks, the Board is targeting spring 2012 for
publishing the payment card network survey results.\7\ To meet this
schedule for the release of payment card network data, the Board will
release the payment card network survey to respondents in early
February 2012. The Board has decided to extend the completion period
from the proposed 30 days to 45 days.\8\
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\6\ The Board proposed to distribute the payment card network
survey by mid-January 2012 and the debit card issuer survey and both
government-administered prepaid card surveys by mid-February 2012.
\7\ In announcing the final rule, the Board committed to publish
annually on its Web site information regarding the average
interchange fees received by exempt issuers and covered issuers in
each payment card network; this information may assist exempt
issuers in determining the networks in which they wish to
participate. The Board did not commit to a timeframe for publishing
this information.
\8\ Future surveys will be made available to respondents by
early February of the respective years and would request return of
the payment card network survey within 45 days and the other three
surveys within 60 days.
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The subsequent sections of this notice address additional comments
on and proposed modifications to specific surveys. In addition, over
time, the Board will continue to clarify the surveys as appropriate.
Detailed Discussion of Public Comments and Response
Government-Administered, General-Use Prepaid Card Issuer Survey (FR
3063a)
General Comments
The Board received several overarching comments on the government-
administered, general-use prepaid card issuer survey. One commenter
suggested that information be collected with respect to costs
associated with government-administered payment programs. Section
920(a)(7)(D) of the EFTA directs the Board to report to the Congress on
the prevalence of the use of general-use prepaid cards in federal,
state, and local government-administered payment programs and the
interchange transaction fees and cardholder fees charged with respect
to the use of such general-use prepaid cards. Therefore, the Board
believes that the collection of data regarding issuer costs is outside
the scope of information required to be reported to the Congress and
has decided not to expand the survey to include such costs.
Two commenters asserted that providing individual responses for
individual government programs, particularly smaller programs, would be
a significant burden for issuers because individual programs may not be
separated on issuers' internal systems. For example, one commenter
asserted that issuers may settle government-program transactions on a
consolidated basis and may not know the individual fees associated with
individual cards because they do not know the terms of the contractual
relationship between the government entity and the third-party
administrator. Therefore, in order to respond to certain portions of
the survey, the issuer would have to obtain the responsive data from
either the third-party administrator or the government entity for which
it is issuing cards. Further, with respect to smaller programs, one of
these two commenters suggested that the Board mitigate this burden by
creating a de minimis threshold for reporting. The Board considered
this suggestion but has decided not to establish such a threshold
because such information would be useful in providing an overview of
the prevalence of general-use prepaid cards among different programs.
The Board recognizes that issuers may not be able to report information
at an individual program level. Nevertheless, the Board will
[[Page 79187]]
require issuers to report at the individual program level to the extent
issuers are able to do so. In addition, the Board will reach out to
individual government agencies, as needed, to help facilitate the
release of program-specific information on a voluntary basis.
Lastly, the Board specifically requested comment on whether there
are issuers that are not depository institutions, and if so, whether
the depository institution holding the insured deposits underlying the
cards should be required to report on behalf of those issuers. The
Board received no responses to this request. The Board has decided to
implement the planned respondent list as proposed but will survey non-
depository institution issuers of government-administered, general-use
prepaid cards if and when any are identified.
Section-by-Section analysis
I. Respondent Information
The Board proposed to have respondents provide the name of the card
issuer covered in the response as well as the contact person(s) name,
survey section for which they are responsible, email, and phone number.
The Board received no comments on this section. This section will be
implemented as proposed with clarifying changes as appropriate.
II. Card Program Information
The Board proposed to have respondents report summary information
on card programs covered in the response, whether the response covers
federal, state, or local programs, jurisdiction, sponsoring government
agency/agencies, a description of payment type, recipients receiving
payments on prepaid cards, and recipients receiving payments by all
payment methods.\9\ One commenter suggested requiring reporting by
state rather than by card program. The Board believes that reporting
data by card program is more consistent with the requirements of the
EFTA. To the extent possible, issuers are to report at the individual
program level. If unable to report program-level information,
respondents should report aggregate program information.
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\9\ Jurisdiction refers to the geographic area in which
government-administered, general-use prepaid cards have been issued
(i.e., nationally, particular state(s), county/counties,
municipality/municipalities).
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In addition, the Board specifically requested comment on the
ability of issuers to provide the total number of recipients receiving
payments, regardless of payment method. One commenter asserted that
issuers are often not in the best position to provide data on the
different payment methods used to disburse benefits under a particular
government-administered payment program. The Board considered this
comment and concluded that questions requesting data on the total
number of recipients in a government-administered program will be
excluded from the survey. These data may be best obtained from the
government entity administering the particular payment program.
Another commenter suggested that the Board provide a method for
specifying how government-administered payment programs count
recipients, such as households or individuals. The Board agrees that
given the varying nature of government-administered payment programs
(for instance, unemployment assistance, the Supplemental Nutrition
Assistance Program (SNAP), and other miscellaneous programs), it is
appropriate to expand the survey to allow respondents to specify the
method by which they count recipients.\10\ Thus, the Board has decided
to amend the survey as suggested.
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\10\ Sections 1075(b)-(d) of the Dodd-Frank Act amended the Food
and Nutrition Act of 2008, the Farm Security and Rural Investment
Act of 2002, and the Child Nutrition Act of 1966 to specify that
EFTA Section 920 does not apply to certain electronic benefit
transfer or other reimbursement systems under those acts. The Board
believes that the government programs under those acts use general-
use prepaid cards that are relevant to the report to the Congress
required under Section 920(a)(7)(D). The Board will expand the
survey to collect this information.
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III. Government-Administered Prepaid Cards
The Board proposed to have respondents report summary information
on the number of cards outstanding, and the allocation of cards
outstanding between cards that can be used on both dual-message
(signature) and single-message (PIN) networks, cards that can be used
on dual-message (signature) networks, and cards that can be used on
single-message (PIN) networks. The Board received no comments on this
section. This section will be implemented as proposed with clarifying
changes as appropriate.
IV. Funding
The Board proposed to have respondents report the value of funds
loaded into prepaid card accounts, funds outstanding on prepaid card
accounts, and all funds paid by all payment methods. The Board
specifically requested comment on whether any funding patterns during
the month may change significantly an issuer's response depending on
the as-of date requested (e.g., the end of the month as proposed). The
Board received no comments on this question and only one comment on the
section related to all funds paid by all payment methods, which is
discussed earlier in Section II. The Board will implement the section
as proposed except with conforming changes to address this comment and
other clarifying changes as appropriate.
V. ATM Transactions
The Board proposed to have respondents report summary information
on the number of cards outstanding at year-end that can be used to make
ATM cash withdrawals, the volume and value of ATM cash withdrawals, and
the ATM fees charged for withdrawals by ATM operators at nonproprietary
ATMs. The Board received no comments on this section. This section will
be implemented as proposed with clarifying changes as appropriate.
VI. Purchase Transactions
The Board proposed to have respondents report summary information
on the volume and value of settled purchase transactions and the volume
and value of settled purchase transactions by authentication method.
The Board received no comments on this section. This section will be
implemented as proposed with clarifying changes as appropriate.
VII. Interchange Fees
The Board proposed to have respondents report interchange fee
revenues received on settled purchase transactions and the allocation
of the interchange fee revenues received on settled purchase
transactions for dual-message (signature) transactions and single-
message (PIN) transactions. The Board received no comments on this
section. This section will be implemented as proposed with clarifying
changes as appropriate.
VIII. Fees Paid by Issuers
The Board proposed to have respondents report the fees paid on ATM
cash withdrawals and the fees paid on over-the-counter at-bank (teller)
cash withdrawals. The Board specifically requested comment on whether
fees paid for over-the-counter at-bank (teller) cash withdrawals should
be included in the survey. The Board received no comments on this
section. This section will be implemented as proposed with clarifying
changes as appropriate.
[[Page 79188]]
IX. Revenues From Cardholder Fees
The Board proposed to have respondents report total revenues
received on all fees charged to cardholders and the allocation of all
fees charged to cardholders between routine purchase transaction fees,
monthly fees, balance inquiry fees, ATM fees, over-the-counter at-bank
(teller) fees, account servicing fees, penalty fees, and all other
fees. The Board received no comments on this section. This section will
be implemented as proposed with clarifying changes as appropriate.
X. Fees Assessed to Cardholders
The Board proposed to have respondents provide summary information
on fees assessed to cardholders, including routine purchase transaction
fees, monthly fees, balance inquiry fees, ATM fees charged to
cardholders, over-the-counter at-bank (teller) fees, account servicing
fees, penalty fees, and all other fees. One commenter was concerned
that requesting a ``minimum transaction fee'' and a ``maximum
transaction fee'' in dollars would create ambiguity as to how issuers
should respond in this section. The commenter suggested that additional
clarity was needed to understand whether respondents should report at
the program level or at the transaction level. The commenter also
recommended the Board provide additional guidance on how to respond
with regard to minimum and maximum transaction fees for programs with
differing fee structures. Another commenter suggested that government-
imposed requirements with regard to fees would likely skew the results
of the survey. The Board has decided to expand the section to allow
respondents to provide an explanation of fees assessed to cardholders
and add questions requesting information about government-imposed fee
requirements.
Government-Administered, General-Use Prepaid Card Government Survey (FR
3063b)
The Board proposed to have respondents provide respondent
information, program information, the number of cards, and the value of
funding. The Board received no comments on this survey. The FR 3063b
survey will be implemented as proposed with clarifying changes as
appropriate.
Interchange Transaction Fees Surveys (FR 3064a and b)
General Comments
The Board asked specific questions and commenters provided several
comments that were relevant to both the debit card issuer survey (FR
3064a) and the payment card network survey (FR 3064b). These topics
included removing the questions requesting data on incentive payments
paid by networks to issuers, the use of the terms ``single-message''
and ``dual-message'' versus ``signature'' and ``PIN,'' whether to
include general-use prepaid card data with signature and PIN
transactions or request prepaid card data separately, and the reporting
burden to complete the survey.
Most commenters stated that the surveys should not collect
information on payments and incentives paid by networks to issuers.
Commenters believed that the instructions were too vague and the
information requested was too institution-specific to allow for valid
aggregation of data. In addition, commenters believed that reporting
even aggregated data would compromise confidentiality. Further,
commenters believed that the enforcement of possible circumvention or
evasion regarding Regulation II was within the purview of the
regulators given supervisory authority over the specific institutions.
Thus, the commenters considered a more productive approach would be to
include this information in the context of an individual bank
examination rather than a more general survey. The Board understands
the issues raised for individual institutions, but believes this
information collected at the network level would provide useful context
to the data collected on network fees assessed on issuers and
acquirers. To address commenter concerns, the Board will not request in
the debit card issuer survey (FR 3064a) information on payments and
incentives received from networks. However, information on payments and
incentives will be included on the payment card network survey (FR
3064b), but in less detail than originally proposed. Specifically,
network respondents will be asked to allocate payments and incentives
paid to acquirers and merchants and those paid to issuers, but not
based on the type of incentives.
In addition, in response to the Board's request for comment on the
best terms to use in identifying types of authentication mechanisms
(single-message and dual-message versus PIN and signature), two
commenters responded that the PIN and signature terminology is
sufficient for the surveys because these terms are generally understood
in the industry. The Board considered these comments, however, for
clarity purposes has decided to retain the single- and dual-message
terminology and the PIN and signature terminology in the surveys as
proposed.
The Board requested comment on whether issuers should report
general-use prepaid card data combined with other transaction data
related to single- or dual-message systems (and if so, whether they
would be able to do so) or should report general-use prepaid card
activity separately. Three commenters stated that general-use prepaid
card information should be reported separately because the commenters
also believed there were significant enough differences in
authorization, clearance, and settlement costs between the programs to
support gathering the data separately. The commenters stated that
prepaid card programs are usually separate from debit card programs
within an issuer's organization and so reporting them separately would
not impose a significant burden. The Board believes that separately
reporting data will provide more accurate reporting of costs associated
with the authorization, clearance, and settlement of both debit cards
and prepaid cards. Thus, the Board has decided to add a new section
(Section V) to the debit card issuer survey (FR 3064a) for the
collection of data similar to Section II for general-use prepaid cards.
A similar question was asked in regard to the payment card network
survey (FR 3064b), however, the Board did not receive any comments and
will implement the payment card network survey as proposed.
Three commenters noted that their estimates of the time required to
complete the surveys were longer than the Board's estimate of 80 hours,
on average, for the debit card issuer survey and 25 hours, on average,
for the payment card network survey. Based on the estimates received
from commenters, the Board has decided to increase the estimate for the
debit card issuer survey (FR 3064a) to 160 hours, and the estimate for
the payment card network survey (FR 3064b) to 75 hours.
Debit Card Issuer Survey (FR 3064a)
Section-by-Section Analysis
I. Respondent Information
The Board proposed to ask respondents to provide the name of the
entity covered in the response and the contact person(s) name, section
of the survey for which they are responsible, email, and phone number.
Respondents also would report whether general-use prepaid cards are
issued.
The Board requested specific comment regarding the feasibility of
requiring each chartered entity that issues debit cards to complete a
separate survey rather than completing one survey for all chartered
entities in the bank holding company. One commenter
[[Page 79189]]
responded that reporting at the charter level was feasible and
appropriate. Two other commenters, however, stated that the process
would be more efficient and less burdensome to report at the bank
holding company level. The Board considered these comments and has
decided to collect these data at the bank holding company level to help
reduce respondent burden. The Board, however, will allow issuers to
respond at the charter level.
The Board also received several comments suggesting that the Board
survey parties other than large issuers and payment card networks, as
proposed. Four commenters suggested that exempt issuers (those with
less than $10 billion in assets) should be allowed to participate
voluntarily in the issuer survey because they believe that the capped
debit card interchange rate will ultimately become the default rate for
all card issuers.\11\ Two commenters stated that the Board should
survey merchants on fraud losses, fraud prevention, and data security
to ensure that the costs of fraud and fraud prevention to all parties
were accounted for and calculated. The Board believes that most exempt
issuers and merchants would find it burdensome to complete the survey.
In addition, comparisons of survey results from mandatory and voluntary
respondents could be misleading because voluntary participants may not
represent fully the broad population of small issuers and merchants.
Further, there are other channels, such as certain questions contained
in the payment card network survey (FR 3064b), to provide information
on the effect of Regulation II on small issuers.
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\11\ Section 235.8(b) of the Board's Regulation II requires that
issuers covered by the interchange fee standards in Regulation II
file reports with the Board. See http://www.federalreserve.gov/paymentsystems/debitfees.htm for a list of institutions that are
known to be non-exempt as of December 31, 2010. This is not a
complete list, as the Board had incomplete information to determine
the exemption status of some institutions that may issue debit
cards.
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II. All Debit Card Transactions (Including General-Use Prepaid Card
Transactions)
The Board proposed to ask respondents to report summary information
for debit card (including general-use prepaid card) transaction volume
and value, chargebacks to acquirers, costs of authorization, clearance,
and settlement, payments and incentives paid by networks to issuers,
costs for fraud prevention and data security, interchange fee revenue,
fraudulent transactions, and fraud losses.
One commenter expressed support for limiting the costs collected to
those related to authorization, clearance, and settlement. Five
commenters, however, asserted that the set of costs should be expanded
to all debit card costs to provide the Board a more comprehensive
accounting of debit card program costs and put authorization,
clearance, and settlement costs into context. The Board requested
comment on the issuers' ability to report the subset of customer
service costs associated with customer inquiries regarding particular
debit card transactions (as opposed to customer inquiries regarding the
account, the debit card generally, or credit cards/ATM cards). One
commenter noted that most issuers track customer inquiries by type and
have reporting systems in place to report at this level of detail.
Thus, the commenter believed that the costs of handling cardholder
inquiries should be included. The Board considered these comments and
has decided to keep the set of data collected as proposed, with the
exception of adding a few questions related to costs specific to
particular debit card transactions, including cardholder inquiries.
Inclusion of such costs can help put some context around authorization,
clearance, and settlement costs without overly expanding the survey.
Although under the framework established by EFTA Section 920(a)(4)(B),
costs specific to a particular debit transaction may be considered in
the determination of costs included in the setting of the interchange
fee standard, inclusion of these costs in the survey does not imply
that the Board will change its determination of allowable costs.
Three commenters noted that respondents might use different
methodologies when asked to allocate shared costs between categories
and not necessarily based on the number of transactions as required by
the surveys. One commenter, however, stated that a consistent
methodology is important for a comparison across respondents. The Board
recognizes that there are several allocation methodologies that could
be reasonably used to distribute costs, however, also recognizes the
importance of having a standard way of reporting these costs across
respondents. Thus, the Board will direct issuers to follow the
allocation methodology specified in relevant questions in the survey.
Additionally, several commenters expressed concern that the surveys
lacked a reconciliation of the U.S. Generally Accepted Accounting
Principles (GAAP) and the International Financial Reporting Standards
(IFRS) for capital expenditures associated with authorization,
clearance, and settlement. The Board considered these comments and has
decided to allow respondents to use either GAAP or IFRS to report costs
that are depreciated or amortized during 2011. The Board recognizes
that even if issuers follow the same set of accounting standards, they
may use different underlying assumptions, such as the useful life for
equipment and software, thus inevitably introducing a degree of
variability between issuers. Because issuer-to-issuer variability is
inherent within either set of accounting standards, the Board believes
that no substantial benefit would be derived by requiring the reporting
based on a specific set of standards that may not be used by the issuer
in other reporting contexts.
The Board requested comment regarding the usefulness of including a
list of fraud prevention activities and, if so, which fraud prevention
activities should be included for the survey. Five commenters responded
to the question. All commenters thought the idea of a list was useful,
but some raised concerns over the clarity of definitions, the need to
remain flexible and open to new technologies, and the need for a non-
exhaustive list. The list is not meant to be exhaustive but rather to
assess the prevalence of what the Board understands to be common fraud
prevention activities. The inclusion of the ``other'' category on the
list and the accompanying textbox was meant to elicit from survey
respondents additional categories of fraud prevention activities. The
Board will assess the information provided and update the list
periodically to reflect new fraud prevention activities as appropriate.
III. All Single-Message (PIN) Debit Card Transactions (Including
General-Use Prepaid Card Transactions)
The Board proposed to ask respondents to submit data for the same
set of questions asked in Section II, but specifically about single-
message debit card programs, including general-use prepaid cards. In
light of the addition of Section V on general-use prepaid cards, as
discussed earlier, the Board will exclude general-use prepaid card
transactions from this section.
IV. All Dual-Message (Signature) Debit Card Transactions (Including
General-Use Prepaid Card Transactions)
The Board proposed to ask respondents to submit data for the same
set of questions asked in Section II, but specifically about dual-
message debit card programs, including general-use
[[Page 79190]]
prepaid cards. In light of the addition of Section V on general-use
prepaid cards, as discussed earlier, the Board will exclude general-use
prepaid card transactions from this section.
Payment Card Network Survey (FR 3064b)
Section-by-Section Analysis
I. Respondent Information
The Board proposed to ask respondents to provide the network
covered in this response and the contact person(s) name, section of the
survey for which they are responsible, email, and phone number.
Respondents also would report whether the payment card network is a
single-message (PIN) or dual-message (signature) network, and whether
the payment card network offers a tiered interchange fee rate schedule
that differentiates between exempt issuers and non-exempt issuers, and
the number of merchant locations. The Board received no comments on
this section. This section will be implemented as proposed with
clarifying changes as appropriate.
II. Debit Card Transactions (Including General-Use Prepaid Card
Transactions)
The Board proposed to ask respondents to report the volume and
value of settled purchase transactions; as well as information related
to card-present versus card-not-present transactions; general-use
prepaid card versus non-general-use prepaid card transactions; general-
use prepaid card transactions exempt from the interchange fee standards
in Regulation II versus general-use prepaid card transactions that are
not exempt; transactions processed for small issuers that are exempt
from the interchange fee standards versus those processed for non-
exempt issuers; pre- and post-effective date transactions processed for
exempt and non-exempt debit card issuers; chargebacks and returns to
merchants; the value of interchange fees; the value of network fees;
and payments and incentives paid by networks to acquirers, merchants,
and issuers.
The Board requested comment on whether the networks can provide
data for exempt and non-exempt issuers that compares information for
three time periods: January 1 to June 30, 2011 (during which all
transactions would be considered exempt); July 1 to September 30, 2011
(during which some networks may have begun to distinguish between
exempt and non-exempt issuers, if such networks are offering a tiered
interchange fee schedule); and October 1 to December 31, 2011 (during
which all networks that provide a tiered interchange fee schedule would
distinguish between exempt and non-exempt issuers). Four commenters
stated that the data should be collected only for two time periods,
pre-and post-October 1, 2011, in order to assess the effect of
Regulation II on the practices of networks in paying and assessing
fees. The Board considered the comments and has decided to modify the
request to collect data for two time periods: January 1 to September
30, 2011 and October 1 to December 31, 2011.
By order of the Board of Governors of the Federal Reserve
System, December 16, 2011.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. 2011-32600 Filed 12-20-11; 8:45 am]
BILLING CODE 6210-01-P