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EU agree caps on debit and credit card interchange fees

Following the release of the final compromise text for the proposed Regulation on interchange fees for card-based payment transactions (the MIF Regulation) on 19 January 2015, European countries have finally endorsed the legislation (21 January 2015).

The European Commission originally proposed the MIF Regulation in July 2013, but it has

European Union

EU agree caps on debit and credit card interchange fees

taken considerable time for the various EU governments and the European Parliament to agree on the detail.

The following caps for interchange fees will apply as from 6 months after entry into force of the MIF Regulation:

  • For all consumer credit card transactions, 0.3% of the transaction value.
  • For all consumer debit card transactions, 0.2% of the transaction value.

“However, for domestic consumer debit card transactions, member states may allow a per transaction fee of no more than €0.05 cents in combination with the 0.2% cap.” explains Julia Woodward-Carlton, EU competition law partner at law firm Eversheds.

“They can do this provided that the sum of interchange fees of the payment card scheme does not exceed 0.2% of the annual transaction value of domestic debit card transactions within each payment card scheme. Moreover, during the first 5 years of application, member states may apply the 0.2% cap calculated as an “annual weighted average” of all domestic debit card transactions within each payment card scheme.

“The caps will not apply to commercial cards or transactions with payment cards issued by three party payment card schemes.

“The legislation will break the “honour all cards” rule (with the exception of cards of the same brand and category which are subject to the same caps above) and the anti-steering provisions, which means retailers will be free to choose which cards to accept.

“We understand that EU legislators will move to complete the formal passage of the MIF Regulation next month, where it must be passed by a full sitting of the European Parliament before it can get the final approval from EU government ministers. After such approval, the legislation can be adopted by the Council once the text has been revised in all languages.

“Whilst the fee caps imposed by the regulation are of major significance and will have a real impact on the industry, other measures included in the legislation, such as the separation of payment card schemes and processing entities, will be extremely challenging for the industry to meet. It will also be of great interest to see when the regulation comes up for review in four years whether the intended benefits have indeed been realised.”

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