Pub. 11 2021-2022 Issue 3-1

coloradobankers.org 22 Who Weighed in on the Fed’s Proposed Changes to Durbin? What Did they Say? By Keith Ash of SRM (Strategic Resource Management) Y ou may recall in an earlier article, we noted that the Federal Reserve began seeking comments on proposed changes to Regulation II of the Durbin Amendment in May. At that time, the Fed said that it felt the changes would be non-substantial and would not include more compliance obligations. Currently, the Fed bars issuers from restricting the number of unaffiliated networks for debit card transactions to fewer than two, including one signature network and one PIN network. The new proposal would make issuers responsible for ensuring that all transactions with U.S. merchants can be routed across two unaffiliated networks. SRM took some time to sort through the comments posted on the Fed’s website and various government sites to summarize the key points – not just from financial institutions but also merchants so we could evaluate both sides of the conversation. It was clear that issuers and merchants were concerned about the various financial and operational implications of any changes to Reg II. Here are the highlights: Issuer Concerns Issuer Compliance: One of the most significant areas of concern is how the proposal would significantly change the compliance obligation by replacing the word “enable” with “ensuring.” This means that issuers must ensure their unaffiliated networks can support all transaction types across all U.S. merchants, but there is still uncertainty around how far this goes. What if a merchant does not accept the alternative network? What if a merchant intentionally limits the routing options of its transactions due to valid business purposes? What if a mobile wallet only has one routing option? Issuers and networks clearly stated the compliance burden of this is significant and not feasible from an operations perspective. Visa warned that issuers could be held accountable for the actions of third parties such as merchants, merchant acquirers, merchant processors, and networks. Unintended Consequences: Associations and networks noted that, while there are PIN solutions merchants could