[Federal Register Volume 81, Number 219 (Monday, November 14, 2016)]
[Notices]
[Pages 79484-79487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27299]


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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

AGENCY: Board of Governors of the Federal Reserve System.
SUMMARY: Notice is hereby given of the final approval of a proposal to 
extend for three years, with revision, the debit card issuer survey (FR 
3064a; OMB No. 7100-0344) and to extend for three years, without 
revision, the payment card network survey (FR 3064b; OMB No. 7100-0344) 
by the Board of Governors of the Federal Reserve System (Board) under 
OMB delegated authority, as per 5 CFR 1320.16 (OMB Regulations on 
Controlling Paperwork Burdens on the Public). Board-approved 
collections of information are incorporated into the official OMB 
inventory of currently approved collections of information. Copies of 
the Paperwork Reduction Act Submission, supporting statements and 
approved collection of information instrument(s) are placed into OMB's 
public docket files. The Federal Reserve may not conduct or sponsor, 
and the respondent is not required to respond to, an information 
collection that has been extended, revised, or implemented on or after 
October 1, 1995, unless it displays a currently valid OMB control 
number.

FOR FURTHER INFORMATION CONTACT: 
    Federal Reserve Board Clearance Officer --Nuha Elmaghrabi--Office 
of the Chief Data Officer, Board of Governors of the Federal Reserve 
System, Washington, DC 20551, (202) 452-3829. Telecommunications Device 
for the Deaf (TDD) users may contact (202) 263-4869, Board of Governors 
of the Federal Reserve System, Washington, DC 20551.
    OMB Desk Officer--Shagufta Ahmed--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, 725 17th Street NW., Washington, DC 20503.
    Final approval under OMB delegated authority of the extension for 
three years, with revision, of the following report:
    Report Title: Interchange Transaction Fees Surveys.

[[Page 79485]]

    Agency Form Number: FR 3064a (Extended with revision) and FR 3064b 
(Extended without revision).
    OMB Control Number: 7100-0344.
    Frequency: FR 3064a--Biennial; FR 3064b--Annual.
    Respondents: Issuers of debit cards (FR 3064a) and payment card 
networks (FR 3064b).
    Estimated Annual Burden Hours: FR 3064a: 89,280 hours; FR 3064b: 
1,275 hours.
    Estimated Average Hours per Response: FR 3064a: 160 hours; FR 
3064b: 75 hours.
    Number of Respondents: FR 3064a: 558; FR 3064b: 17.
    General description of report: The FR 3064a and 3064b surveys are 
authorized by subsection 920(a) of the Electronic Fund Transfer Act, 
which was amended by section 1075(a) of the Dodd-Frank Act.\1\ This 
statutory provision requires the Federal Reserve, at least once every 
two years,\2\ to disclose aggregate or summary information concerning 
the costs incurred and interchange transaction fees charged or received 
by issuers or payment card networks in connection with the 
authorization, clearance or settlement of electronic debit transaction, 
as the Federal Reserve considers appropriate and in the public 
interest.\3\ It also provides the Federal Reserve with authority to 
require issuers and payment card networks to provide information to 
enable the Federal Reserve to carry out the provisions of the 
subsection.\4\ The obligation to respond to these surveys is mandatory.
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    \1\ 15 U.S.C. 1693o-2.
    \2\ The subsection refers to biannual disclosures and the 
Federal Reserve interprets this to mean once every two years. See 76 
FR 43458 (July 20, 2011).
    \3\ 15 U.S.C. 1693o-2(a)(3)(B).
    \4\ Id.
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    In accordance with the statutory requirement, the Federal Reserve 
will release aggregate or summary information from the survey 
responses. In addition, the Federal Reserve will release, at the 
network level, the percentage of total number of transactions, the 
percentage of total value of transactions, and the average transaction 
value for exempt and not-exempt issuers obtained on the FR 3064b. The 
Federal Reserve has determined to release this information both because 
it can already be determined mathematically based on the information 
the Federal Reserve currently releases on average interchange fees and 
because the Federal Reserve believes the release of such information 
may be useful to issuers and merchants in choosing payment card 
networks in which to participate and to policymakers in assessing the 
effect of Regulation II on the level of interchange fees received by 
issuers over time.
    However, the remaining individual issuer and payment card 
information collected on these surveys can be kept confidential under 
exemption (b)(4) of the Freedom of Information Act (FOIA) because staff 
has advised that, if released, this information would cause substantial 
harm to the competitive position of the survey respondents.\5\
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    \5\ 5 U.S.C. 552(b)(4) (exempting from disclosure ``trade 
secrets and commercial or financial information obtained from a 
person and privileged or confidential'').
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    Abstract: The Wall Street Reform and Consumer Protection Act of 
2010 (Dodd-Frank Act) requires the Federal Reserve to disclose, at 
least every two years, such aggregate or summary information concerning 
the costs incurred for, and interchange transaction fees received by, 
issuers with respect to debit card transactions, as the Federal Reserve 
considers appropriate or in the public interest. The data from these 
surveys are used in fulfilling that disclosure requirement. In 
addition, the Federal Reserve uses data from the payment card network 
survey (FR 3064b) to publicly report on an annual basis the extent to 
which networks have established separate interchange fees for exempt 
and covered issuers. Finally, the Federal Reserve uses the data from 
these surveys in determining whether to propose revisions to the 
interchange fee standards in Regulation II (12 CFR part 235). The Dodd-
Frank Act provides the Federal Reserve with authority to require debit 
card issuers and payment card networks to submit information in order 
to carry out provisions of the Dodd-Frank Act regarding interchange fee 
standards.
    Current Actions: On August 9, 2016 the Federal Reserve published a 
notice in the Federal Register (81 FR 52689) requesting public comment 
for 60 days on the extension, with revision, of the Interchange 
Transaction Fees Surveys. The comment period for this notice expired on 
October 11, 2016. The Federal Reserve received one joint comment letter 
addressing this collection, which are summarized and addressed below.

Summary Discussion of Public Comments and Recommended Responses 
6
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    \6\ On August 2, 2016, the Federal Reserve Board granted initial 
approval of these surveys. Notice of the proposed action was 
published in the Federal Register on August 9, 2016; the comment 
period ended on October 11, 2016. The Federal Reserve received one 
comment letter addressing the proposed revisions to the FR 3064 
information collection.
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    The Federal Reserve received one joint comment letter from eight 
banking industry associations, which concerned the debit card issuer 
survey (FR 3064a). The commenters in this letter commended the Federal 
Reserve for proposing a full 90-day period for respondents to complete 
the survey, but suggested that the 90-day period commence in mid-
February rather than mid-January, because respondents generally cannot 
begin collecting the requested data until February. The commenters 
suggested several changes to the online reporting tool which they 
argued would facilitate completion of the survey. The commenters also 
suggested that the survey no longer ask respondents to provide 
information on interchange fees repaid as a result of chargebacks and, 
separately, interchange fees repaid as a result of returns, but instead 
ask respondents to provide a single number that is interchange fees 
repaid as a result of chargebacks or returns. In addition, the 
commenters argued that the survey's definition of ``costs of 
authorization, clearance, and settlement'' fails to include all costs 
related to a debit card issuer's authorization, clearance, and 
settlement activities, and they recommended expanding the definition to 
include additional cost items. Lastly, the commenters suggested that 
international fraud losses be included as part of reported fraud 
losses.
    In addition to revisions that were already suggested and were 
supported by the commenters, the Federal Reserve revised the debit card 
issuer survey to incorporate certain additional suggestions from the 
commenters. In particular, the Federal Reserve is commencing the survey 
at the beginning of February, providing a total line for interchange 
fees repaid as a result of chargebacks or returns, and making certain 
technical changes to the reporting tool for the survey. The Federal 
Reserve is not expanding the survey to include international fraud 
losses or additional cost elements.

[[Page 79486]]

Detailed Discussion of Public Comments and Recommended Responses

Debit Card Issuer Survey (FR 3064a)

Section-by-Section Analysis
Section II: All Debit Card Transactions, Section III: All Single-
Message (PIN) Debit Card Transactions, Section IV: All Dual-Message 
(Signature) Debit Card Transactions, and Section V: General-Use Prepaid 
Card Transactions
    Question 3: Cost of authorization, clearance, and settlement--The 
Federal Reserve proposed to delete questions 3e and 3f which break out 
the fixed and variable cost components for line items 3b.1 In-house 
costs and 3b.2 Third-party processing fees, respectively. The 
commenters strongly supported this proposal. They argued that the 
allocation of costs to fixed and variable components places an undue 
burden on respondents by forcing them to categorize costs in an 
artificial manner outside of respondents' standard cost accounting 
practices. The Federal Reserve believes that the commenters' support 
for this change validates the Federal Reserve's proposal to remove 
these items.
    The commenters further believe that the definition of ``costs of 
authorization, clearance, and settlement'' fails to include all costs 
related to a debit card issuer's authorization, clearance, and 
settlement activities. The commenters provided a list of categories of 
costs that should be included and recommended that these categories be 
reported as individual cost items, if they are not already. 
Specifically, the commenters recommended expanding the definition to 
include the following items: costs associated with receiving, 
responding to, and resolving customer inquiries with respect to debit 
card transactions; debit card transaction compliance costs; debit card 
transaction non-sufficient funds handing costs; card production and 
delivery costs; and a portion of costs related to establishing and 
maintaining debit account relationships.
    The Federal Reserve is keeping the set of data elements as 
proposed. Some of the proposed categories of costs (e.g., cardholder 
inquiry and non-sufficient funds handling costs) are already included 
in the survey, and all of the proposed categories are costs that the 
Federal Reserve determined would not be considered as part of the 
interchange fee standard in Regulation II. Including these additional 
cost categories and requiring issuers to report at a more detailed 
level would not significantly enhance the Federal Reserve's 
understanding of the relevant costs for Regulation II and would 
represent a significant burden to respondents.
    The commenters suggested that international fraud losses be 
included as part of reported fraud losses. The commenters argued that 
international fraud losses should be considered as part of the fraud 
losses associated with domestic transactions for U.S.-issued debit 
cards because the data compromise leading to the fraudulent debit card 
activity frequently occurs in the United States and generates 
fraudulent international transactions even if the cardholder never 
leaves the United States. The commenters likened this to the Federal 
Reserve allowing respondents to include costs from international 
transaction processing centers when reporting the costs associated with 
U.S.-issued debit cards. The commenters acknowledge that the Federal 
Reserve's authority to regulate debit card activity is restricted to 
the United States, but argued that this does not preclude the Federal 
Reserve from considering costs that occurred outside of the United 
States, if those costs could not have been incurred but for the 
issuance of a U.S. debit card.
    International fraud losses arise from international transactions, 
not domestic transactions, and are therefore outside the scope of 
Regulation II.\7\ As such, international fraud losses are analogous to 
ATM fraud losses, which are also not included. The commenters noted 
that costs incurred at international transaction processing centers are 
included, but that is because costs incurred at those processing 
centers are still associated with domestic transactions, whereas 
international fraud losses are not associated with domestic 
transactions. Thus, international fraud losses will not be reported.
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    \7\ Regulation II applies only to electronic debit transactions 
that are initiated at a merchant located in the United States. See 
paragraph 235.2(h)-5 of the Official Commentary on Regulation II.
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    Question 6: Interchange fee revenue--The commenters suggested that 
the survey no longer ask respondents to provide information on 
interchange fees repaid as a result of chargebacks and, separately, 
interchange fees repaid as a result of returns. The commenters argued 
that payment networks providing interchange fee information do not 
readily provide a breakdown of chargebacks and returns, such that 
respondents are often forced to make arbitrary allocations. The 
commenters suggested that the survey instead ask respondents to provide 
a single value consisting of interchange fees repaid as a result of 
chargebacks or returns.
    The Federal Reserve added a line item in which respondents are 
asked to provide the value that commenters argue is readily available: 
interchange fees repaid as a result of chargebacks or returns. However, 
the Federal Reserve will continue to also ask respondents to provide a 
breakdown of this total number into interchange fees repaid as a result 
of chargebacks and, separately, interchange fees repaid as a result of 
returns. Respondents will, as always, have the option of entering ``not 
reported'' for those items.
General Instructions
    The Federal Reserve proposed to make the survey available in mid-
January, with a deadline in mid-April, thereby giving respondents a 
full 90 days in which to provide responses. The commenters commended 
the Federal Reserve for proposing a 90-day completion period, but 
suggested that the 90-day period begin in mid-February rather than in 
mid-January. The commenters noted that issuers will not have the 
required data to respond to the survey before mid-February; for 
instance, processors and networks often do not provide invoices to 
issuers until mid-January or later. Also, commenters argued that the 
necessary personnel are unavailable to begin completing the survey 
until other end-of-year closing activities are complete.
    The Federal Reserve is making the survey available at the beginning 
of February instead of mid-January, and due in early May rather than 
mid-April, in order to address the timing concerns raised by the 
commenters.
    The commenters also proposed three changes to the online reporting 
tool for the survey. First, commenters recommended that the online 
survey round entries to the nearest whole dollar. Second, commenters 
recommended that entries be right-justified. Third, commenters 
suggested that there be a way for respondents to consolidate all of 
entries, across all sections, into a single editable spreadsheet. The 
Federal Reserve is making all of these changes, subject to any 
unanticipated technical difficulties that may arise in the current 
interface.

Payment Card Network Survey (FR 3064b)

    The Federal Reserve received no comments on the Payment Card 
Network survey (FR 3064b).


[[Page 79487]]


    Board of Governors of the Federal Reserve System, November 8, 
2016.
Robert deV. Frierson,
Secretary of the Board.
[FR Doc. 2016-27299 Filed 11-10-16; 8:45 am]
 BILLING CODE 6210-01-P