Interchange Fee Regulation—essentials

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Interchange Fee Regulation—essentials
  • Background to implementation of the EU IFR
  • Meaning of interchange fees
  • Regulation of Interchange Fees
  • The IFR—caps on interchange fees
  • The rules
  • The exemptions
  • The IFR—business rules
  • Licensing
  • Separation of card scheme and processing
  • More...

Interchange Fee Regulation—essentials

Background to implementation of the EU IFR

The EU Interchange Fee Regulation (OJ L 123/1) (an EU regulation on interchange fees for card-based payment transactions) (Regulation (EU) 2015/751) (the EU IFR) was enacted in response to the perceived anti-competitive effect of fees paid by merchants to banks for accepting payments made using credit or debit cards. The EU IFR imposes a cap on such fees and introduces a set of business rules aimed at prohibiting anti-competitive behaviour. The goal is to increase competition, lower prices for consumers and increase opportunities for new entrants into the payments market. The EU IFR entered into effect on 8 June 2015. The EU IFR has applied since 8 June 2015, with the exception of Articles 3, 4, 6 and 12, which became applicable on 9 December 2015, and the exception of Articles 7, 8, 9 and 10, which became applicable on 9 June 2016.

The cap on fees introduced by the EU IFR should also be considered alongside the second Payment Services Directive (Directive 2015/2366/EU) (PSD2) which was transposed into UK law on 13 January 2018, and which prohibits surcharging for the use of payment instruments which are subject to the caps. The combined effect of the EU IFR and PSD2 is therefore to introduce maximum levels of interchange fees for transactions based on

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