August 20, 2021

FTC Supports Increasing Competition Among Debit Card Processors

Lori Kalani, Bernard Nash

Cozen O'Connor

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Cozen O'Connor

The Federal Trade Commission (“FTC”) sent a comment to the Board of Governors of the Federal Reserve System (“Fed”) urging the Fed to strengthen implementation of debit-card fees and routing reforms to the Electronic Fund Transfer Act (“EFTA”) to increase competition among debit card processing networks through the Fed’s proposed clarification of EFTA’s implementing regulation, Regulation II.
According to the FTC, debit cards are used almost twice as often as credit cards in the United States, and merchants must pay fees to debit card issuers when they accept debit card payments. Merchants often cannot select low-fee payment processing networks unless the issuer accepts those networks, and a lack of competition drives up transaction costs for consumers. The FTC’s comment further notes that the Dodd-Frank Wall Street Reform and Consumer Protection Act amended EFTA to promote competition among debit card processing networks by requiring that issuers provide merchants with a choice of at least two networks for processing electronic debit transactions.
The comment endorses the Fed’s proposed rule, which clarifies that EFTA’s requirement for network choice applies to all debit-card transactions, regardless of whether a physical debit card is used or whether it is a remote transaction, such as electronic or pay-by-phone payments. In addition, the FTC’s comment calls on the Fed to engage in rulemaking to stop processing networks from creating routing-based incentives for issuers to evade Regulation II’s mandate for providing a choice of two unaffiliated networks.

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