[Federal Register Volume 79, Number 10 (Wednesday, January 15, 2014)]
[Notices]
[Pages 2659-2662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00489]
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FEDERAL RESERVE SYSTEM
Agency Information Collection Activities: Announcement of Board
Approval Under Delegated Authority and Submission to OMB
AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: Notice is hereby given of the final approval of a proposed
information collection by the Board of Governors of the Federal Reserve
System (Board) under OMB delegated authority, pursuant to 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 statement 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: Federal Reserve Board Clearance
Officer--Cynthia Ayouch--Office of the Chief Data Officer, 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 extension, with
revision, of the following information collection:
Report title: Interchange Transaction Fees Surveys.
Agency form number: FR 3064a and FR 3064b.
OMB Control number: 7100-0344.
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: 111,600 hours; FR
3064b: 1,350 hours.
Estimated average hours per response: FR 3064a: 200 hours; FR
3064b: 75 hours.
Number of respondents: FR 3064a: 558; FR 3064b: 18.
General description of report: This information collection is
authorized by subsection 920(a) of the Electronic Fund Transfer Act,
which was amended by section 1075(a) of the Dodd-Frank Act. 15 U.S.C.
1693o-2. This subsection requires the Board to disclose (on a biennial
basis) aggregate or summary information concerning the costs incurred,
and interchange transaction fees charged or received, by issuers or
payment card networks in connection with the authorization, clearance
or settlement of electronic debit transaction 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 and payment
card networks to provide information to enable the Board to carry out
the provisions of the subsection. Response to these surveys is
mandatory.
In accordance with the statutory requirement, the Board currently
releases aggregate or summary information from the FR 3064b survey
responses, and, average interchange fees at the network level. However,
as proposed, the Board will release, at the network level, the
percentage of total number of transactions, the percentage of total
value of transactions, and the average transaction value for exempt and
not-exempt issuers obtained on the FR 3064b. The Board has determined
to release this information both because it can already be calculated
based on the information the Board currently releases on average
interchange fees and because the Board believes the release of such
information may be useful to issuers and merchants in choosing payment
card networks in which to participate and to policymakers in assessing
the effect of Regulation II on the level of interchange fees received
by issuers over time. However, the remaining individual issuer and
payment card information collected on these surveys will be treated as
confidential under exemption (b)(4) of the Freedom of Information Act
(FOIA), which protects information that, if released, would cause
substantial harm to the competitive position of the survey respondents.
5 U.S.C. 552(b)(4) (exempting from disclosure ``trade secrets and
commercial or financial information obtained from a person and
privileged or confidential'').
Abstract: The Wall Street Reform and Consumer Protection Act of
2010 (Dodd-Frank Act) requires the Board to disclose (on a biennial
basis) aggregate or summary information concerning the costs incurred,
and interchange transaction fees charged or received, by issuers or
payment card networks in connection with the authorization, clearing,
or settlement of electronic debit transactions as the Board considers
appropriate or in the public interest. The data from these surveys are
used in fulfilling that disclosure requirement. In addition, the Board
uses data from the payment card network survey (FR 3064b) to publicly
report on an annual basis the extent to which networks have established
separate interchange fees for exempt and covered issuers.\1\ Finally,
the Board uses the data from these surveys in determining whether to
propose revisions to the interchange fee standards in Regulation II (12
CFR Part 235). The Dodd-Frank Act provides the Board with authority to
require debit card issuers and payment card networks to submit
information in order to carry out provisions of the Dodd-Frank Act
regarding interchange fee standards.
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\1\ Average debit card interchange fee by payment card network,
http://www.federalreserve.gov/paymentsystems/regii-average-interchange-fee.htm.
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Current Actions: On October 18, 2013, the Board published a notice
in the Federal Register (78 FR 62352) requesting public comment for 60
days on the proposal to extend, with revision, the Interchange
Transaction Fees Surveys. The comment period expired on December 17,
2013. The Board received five comment letters regarding the proposed
revisions to these surveys. The comments are summarized and addressed
below.
[[Page 2660]]
Summary of Public Comments
The Board received comments from one financial institution, one
banking industry trade association, a joint letter from eight banking
industry associations (including the one association that responded
separately), and two payment card networks. Some general comments were
received regarding the treatment of confidential data, time schedule,
reporting panel, and report format. Commenters also provided input on
how to categorize debit card transactions. In addition, one commenter
focused on specific data items proposed for collection in the debit
card issuer survey. The commenter asked the Board to include additional
reporting categories within fixed and variable costs and additional
clarification on affiliated processor costs and international fraud
losses. The subsequent sections of this notice address the comments on
and modifications to specific surveys.
General Comments
The Board asked specific questions and commenters provided several
comments that are relevant to both the debit card issuer survey (FR
3064a) and the payment card network survey (FR 3064b). These topics
included the reporting burden to complete the surveys, reporting panel,
report format, usefulness of the information collected, and
opportunities to enhance the quality, utility, and clarity of the
information collected.
One commenter encouraged the Board to allow completion of the
surveys on a consolidated basis at the holding company level rather
than at the individual affiliate level. The commenter suggested that
requiring individual issuer responses, as opposed to holding company-
level responses, would be burdensome with little apparent benefit. The
survey already requests respondents to provide these data at the bank
holding company level to reduce respondent burden. Issuers will
continue to have the opportunity to respond at the charter level if
needed.
Two commenters suggested that exempt issuers (those with less than
$10 billion in assets) be added to the reporting panel and allowed to
participate voluntarily in the debit card issuer survey.\2\ The Board
does not believe it would be appropriate to include exempt issuer costs
in the determination of the interchange fee standard for covered
issuers. Moreover, because some covered issuers have small debit card
programs, the Board already collects data on costs of small debit card
programs through its survey of covered issuers. 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. For these reasons, the survey will not
be expanded to cover exempt issuers.
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\2\ 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.
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Two commenters requested that the Board continue to conduct follow-
up interviews with respondents after survey responses are submitted to
improve the quality of the data received, increase the consistency of
responses, and reconcile inconsistencies across responses. The Board
will continue the existing follow-up process, which has worked well in
improving the quality of the data.
Two commenters requested that respondents be allowed to elaborate
on their responses to particular questions. For example, issuers may
want to elaborate on any assumptions that they had to use to calculate
certain cost items. This flexibility can increase the quality of survey
responses and enable the Board to check for consistency across
respondents. The surveys currently have comment boxes that can be used
for this purpose.
The Board also requested comment on the cost of providing
information and feasibility of automating the information collection.
The Board did not receive any comments on these questions.
In response to the Board's question on how single-message (PIN) and
dual-message (signature) transactions should be categorized, several
commenters suggested that the Board should not equate PIN
authentication with single-message networks and signature
authentication with dual-message networks. One commenter further
suggested that the Board collect information solely on the messaging
system of the network (single-message or dual-message) without regard
to the methods by which transactions processed or routed on that
network may be authenticated. The Board agrees with these comments and
will continue to categorize debit card transactions by message type and
deemphasize the link between message type and authentication method.
Further, because a network may be able to process both single-message
and dual-message transactions, the Board will clarify Question 3 in
Section I of the Payment Card Network Survey to reflect this, and to
collect information from the network for each message type.
Debit Card Issuer Survey (FR 3064a)
Section-by-Section Analysis
Section I: Respondent Information
Question 3: Do you have a general-use prepaid card program?--The
Board proposed to delete this question because it is redundant given
that issuers with general-use prepaid card programs complete Section V.
The Board did not receive any comments on this section. This section
will be implemented as proposed with clarifying changes as appropriate.
Section II: All Debit Card Transactions (Including General-Use Prepaid
Card Transactions) and Section V: General-Use Prepaid Card Transactions
Question 1: General-use prepaid card exemption: Exempt vs. non-
exempt general-use prepaid card transactions--The Board proposed to
modify question 1.d by deleting line item 1d.1 (Volume and Value), All
general-use prepaid card transactions between January 1 and September
30, 2011. As the rule went into effect on October 1, 2011, collecting
data for this time frame was necessary to compare 2011 data before and
after the effective date, but the split time frame is no longer
relevant. The Board did not receive any comments on this section. This
section will be implemented as proposed and subsequent line items will
be renumbered.
Section II: All Debit Card Transactions, Section III: All Single-
Message (PIN) Debit Card Transactions, Section IV: All Dual-Message
(Signature) Debit Card Transactions, and Section V: General-Use Prepaid
Card Transactions
Question 3: Cost of authorization, clearance, and settlement--The
Board proposed to add questions 3e and 3f to break out the fixed and
variable cost components for line items 3b.1 In-house costs and 3b.2
Third-party processing fees, respectively. The Board also proposed
adding definitions for variable and fixed costs to the instructions.\3\
In addition, the Board proposed to modify the instruction for Question
3 to exclude transaction monitoring costs as part of the costs of
authorization, clearance, and settlement. Transactions monitoring costs
are reported in Question 5, Fraud prevention and data security costs,
line item 5a.1 Transactions monitoring cost tied to authorization. One
commenter stated that the variable cost/fixed cost
[[Page 2661]]
dichotomy is not an appropriate means for identifying incremental
authorization, clearance, and settlement costs. The commenter believes
that the definition of ``costs of authorization, clearance, and
settlement'' fails to include all costs related to a debit card
issuer's authorization, clearance, and settlement activities. The
commenter recommended that the set of costs 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 in context. The commenter provided a list of
categories of costs that should be included and recommended that these
categories be reported as individual cost items.
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\3\ Fixed costs are defined as costs that do not vary with
changes in the number or value of transaction over the course of the
reporting period (i.e., calendar year 2013 for this application of
the survey).
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Many of the proposed categories of costs are included in various
sections in the survey and those that are not included are costs that
the Board did not consider as part of the interchange fee standard in
Regulation II. Including these additional cost categories and requiring
issuers to report at a more detailed level would not significantly
enhance the Board's understanding of the relevant costs for Regulation
II and would represent a significant burden to respondents. For these
reasons, the set and format of data collected will be implemented as
proposed.
One commenter asserted that the treatment of affiliated processor
costs at the cost of service to the affiliate processor rather than the
cost to the issuer ignores common inter-affiliate cost accounting
practices under which the issuer is charged an imputed mark-up for
services provided by the affiliated processor. The commenter asserted
that the proposed change would result in issuers that use affiliates
for transaction processing services reporting lower cost data than they
would have reported had they used an unaffiliated processor. The Board
will modify the instructions for Question 3 to allow affiliated
processor costs to be reported at the cost to the issuer, provided that
the cost to the issuer is determined in a way that is consistent with
fees that the affiliated processor would charge to an unaffiliated
debit card issuer.
One commenter suggested that international fraud losses be included
as part of reported fraud losses. The commenter noted that
international fraud losses are a material cost and are tied to domestic
debit cards. The Board notes that international fraud losses arise from
transactions that are outside the scope of Regulation II. As such,
international fraud losses are analogous to ATM fraud losses, which are
also not included. For these reasons, the survey will not be modified
to include international fraud losses.
General Instructions
The Board proposed to change the timing for conducting the calendar
year 2013 survey, making the survey available by February 3, 2014, with
responses due by March 17, 2014. Future surveys would revert to the
original schedule (mid-February to mid-April). Two commenters
recommended a 90-day completion period for the debit card issuer survey
to allow ample time for internal review before the surveys are
submitted to the Board.\4\ Given the potential need to expeditiously
adjust the Regulation II interchange fee standard, in the event the
Board does not prevail on appeal, the 2014 time frame will remain as
proposed; however, the time frame to compete future year surveys will
be increased to 90 days.
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\4\ To enable the Board to collect and use updated data if
necessary to respond quickly to pending litigation regarding
Regulation II, the Board proposed to accelerate the schedule for
calendar year 2013 survey, making the survey available by February
3, 2014, with responses due by March 17, 2014.
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Payment Card Network Survey (FR 3064b)
Section-by-Section Analysis
Section I: Respondent Information
Is your payment card network a single-message (PIN) or dual-message
(signature) network? The Board requested comment on a payment card
network's ability to process single-message transactions across dual-
message networks and vice versa. In addition, the Board requested
comment on how such transactions should be categorized. As mentioned
above, several commenters suggested that the Board not equate PIN
authentication with single-message networks and signature
authentication with dual-message networks in either survey. The
commenters suggested that the Board collect information solely on the
messaging system of the network (single-message or dual-message)
without regard to the methods by which transactions processed or routed
on that network may be authenticated. The Board concurs and the surveys
will continue to categorize debit card transactions as single- or dual-
message without the inference that all messages of a given type use the
same authentication method. In addition, the survey will collect
information from the network for each message type.
Section II: Debit Card Transactions
Small issuer exemption: Transactions using card of exempt vs. non-
exempt issuers--The Board proposed to revise this section by deleting
line item 1e.1 (Volume and Value), All settled purchase transactions
between January 1, 2011-September 30, 2011, because the timeframe is no
longer relevant. The Board did not receive any comments on this
section. This section will be implemented as proposed and subsequent
line items will be renumbered.
Transactions using card of exempt vs. non-exempt issuers (January
1, 2011-September 30, 2011)--The Board proposed to revise this section
by deleting line items 1f through 1f.2 as the timeframe is no longer
relevant. The Board did not receive any comments on this section. This
section will be implemented as proposed and subsequent line items will
be renumbered.
General-use prepaid card exemption: Exempt vs. non-exempt general-
use prepaid card transactions and General-use prepaid card exemption:
Interchange fees on exempt vs. non-exempt card transactions--The Board
proposed to revise line items 1g and 2i by requiring networks to
allocate volume, value, and interchange fee revenue for exempt general-
use prepaid card transactions between transactions using prepaid cards
issued by exempt (small) issuers (adding line items 1g.1.1 and 2i.1.1)
and transactions using prepaid cards issued by non-exempt issuers
(adding line items 1g.1.2. and 2i.1.2). Currently, payment card
networks are required to allocate volume and value of general-use
prepaid card transactions, and associated interchange fee revenue,
between exempt and non-exempt general-use prepaid card transactions and
interchange fees. Under Regulation II, a general-use prepaid card
transaction may be exempt from the interchange fee standards either
because the card is issued by an issuer that qualifies for the small
issuer exemption or because the card qualifies for the prepaid card
exemption, irrespective of the size of the issuer. The proposed break
out of these data would allow the Board to determine which type of
exemption applies to each exempt transaction, thus improving
interpretation of these data. The Board did not receive any comments on
this section. This section will be implemented as proposed.
Small issuer exemption: Interchange fees on transactions using card
of exempt vs. non-exempt issuers--The
[[Page 2662]]
Board proposed to revise this section by deleting line items 2g.1, All
interchange fees paid to issuers between January 1, 2011-September 30,
2011, as these timeframes are no longer relevant. The Board did not
receive any comments on this section. This section will be implemented
as proposed and subsequent line items will be renumbered.
Small issuer exemption: Network fees received from exempt vs. non-
exempt issuers--The Board proposed to revise this section by deleting
line items 3c.1, All network fees received from issuers that settled
between January 1, 2011-September 30, 2011, and line items 3d through
3d.2, as these timeframes are no longer relevant. The Board did not
receive any comments on this section. This section will be implemented
as proposed and subsequent line items will be renumbered.
Small issuer exemption: Payments and incentives paid to exempt vs.
non-exempt issuers--The Board proposed to revise this section by
deleting line items 4c.1, All payment and incentives paid to issuers
between January 1, 2011-September 30, 2011, and line items 4d through
4d.2, as these timeframes are no longer relevant. The Board did not
receive any comments on this section. This section will be implemented
as proposed and subsequent line items will be renumbered.
General Instructions
Response Confidentiality and Burden--The Board proposed to revise
the confidentiality statement to indicate that the Board may release
some information identified by network by total, or as an average: the
percent of total number and value of transactions for exempt and non-
exempt issuers; and the average transaction value for exempt, non-
exempt, and all issuers. To date, the Board has only published this
information in the aggregate across networks. One network commenter
expressed concern regarding the confidentiality of survey data, stating
that the Board's current justification does not constitute a public
policy rationale that justifies the publication of additional non-
public and proprietary data. This information can already be
approximated at the network level from the information the Board
currently releases on the network's average interchange fees. The
precise network-specific information may be useful to issuers (both
exempt and non-exempt) and merchants in choosing payment card networks
in which to participate and to policymakers in assessing the effect of
Regulation II on the level of interchange fees received by exempt and
non-exempt issuers over time. For example, the disclosure of the
percent of total number and value of transactions for exempt and non-
exempt issuers may assist exempt issuers in identifying networks that
may have operations focused on those issuers. For these reasons, the
revisions to the confidentiality statement will be implemented as
proposed.
Board of Governors of the Federal Reserve System, January 9,
2014.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2014-00489 Filed 1-14-14; 8:45 am]
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