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The Fed Makes It Final: All Issuers Must Offer a Choice of Unrelated Networks for All Debit

Digital Transactions

The Federal Reserve said late Monday it has completed work on a clarification that reinforces a more than decade-old requirement that issuers enable a choice of at least two completing networks for online debit card transactions. The release follows months of research and investigation by the Fed and will go into effect July 1.

The announcement, which the regulator characterized as an “update” to its regulations enforcing the 2011 Durbin Amendment to the Dodd-Frank Act, answers years of complaints by merchants that issuers and processors were effectively shuttling all of their online traffic to a single network, typically Visa or Mastercard.

This practice, merchants have said, raised their transaction costs and violated the language of the law. Issuers and processors have maintained the practice is necessary in many cases where competing networks are unable to handle so-called PINless debit, or online transactions without the PIN codes cardholders enter to authenticate themselves in physical stores. By contrast, merchants have complained for more than a decade that debit card issuers have largely evaded Durbin, which requires a choice of at least two networks for both offline and online transactions.