The Federal Reserve's Regulation II implements US debit-card interchange and routing requirements. Covered interchange limits sit alongside unaffiliated-network routing duties, shaping debit acceptance economics and processing choices for the transactions and institutions in scope.
TL;DR:
- Limits interchange for covered debit issuers and protects unaffiliated-network routing choice.
- Fee exemptions and routing obligations have different scopes.
- The rule differs from credit-card interchange and the merchant's total acquiring charge.
Summary
Two connected parts of the debit framework
Regulation II, 12 CFR Part 235, implements the statutory framework for debit-card interchange and routing. One part regulates interchange received by covered issuers, while another addresses network exclusivity and routing restrictions. These provisions concern electronic debit transactions within their defined scope. They should be separated analytically because an exemption or condition applying to the fee limit does not necessarily determine how the routing provisions apply.
Covered interchange and its exemptions
The regulation establishes the permitted interchange framework for covered debit issuers and includes conditions for the relevant fraud-prevention adjustment. It also contains exemptions, including provisions for smaller issuers and specified card programmes. Interchange is only one component of the economics of card acceptance. The rule does not itself establish a universal all-in merchant service charge, which can also include network, acquiring and other charges under the merchant's commercial arrangement.
Unaffiliated networks and merchant choice
The network and routing provisions restrict arrangements that limit covered debit transactions to a single network or affiliated networks and protect the ability to direct a transaction over an enabled network. Their application includes the relevant card-not-present context as well as physical acceptance. The practical question is which networks can actually process the transaction and whether the available choice is restricted, rather than simply how many logos appear on the card.
Issuer status and transaction type both matter
Applying the regulation requires identifying the issuer, the card programme and the electronic debit transaction. A small-issuer interchange exemption should not be taken as a blanket exemption from every routing requirement, and a credit-card transaction falls under a different framework. The Federal Reserve's interchange statistics describe observed fee patterns; the operative legal requirements come from Regulation II and its interpretations, not from an average fee reported for a past period.
Keywords
- Regulation II
- debit interchange
- issuer caps
- network routing
- unaffiliated networks
- merchant choice
- fee exemptions
- processing options
- acceptance economics
- covered issuers