Updated Guidance for Regulation II Fees and Routing

March 15, 2013 at 6:57 pm Leave a comment

The Federal Reserve updated its FAQs for Regulation II Fees and Routing on March 13, 2013.  The last minute clarification on the network exclusivity and routing provisions, which go into effect on April 1, 2013, may cause prepaid card issuers to scramble to implement changes to comply.  The FAQ reads as follows:

 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)

 While most issuers intend to make PINs available to cardholders and inform them how to obtain a PIN, this new clarification appears to imply that process would be insufficient to comply with Regulation II.

 http://www.federalreserve.gov/paymentsystems/regii-faqs.htm

Entry filed under: Uncategorized.

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