The PSR's 2018 information notices issued in relation to monitoring of article 5 of the EU Interchange Fee Regulation
The Interchange Fee Regulation (IFR) introduced a cap on certain interchange fees applicable to payment card transactions. It prohibits the circumvention of those caps through alternative flows of funds.
The Payment Systems Regulator Limited (PSR) is the lead competent authority for the IFR in the UK. We are responsible for monitoring compliance with the IFR and taking enforcement action where appropriate. Since the IFR caps on interchange fees came into effect on 9 December 2015, we have been actively monitoring compliance of issuers and acquirers in the UK with those caps.
On 11 July 2018, we issued information notices to Mastercard Europe SA (Mastercard) and Visa Europe Ltd (“Visa”) (referred to together as “the parties”) that will help us to monitor compliance with the prohibition on circumvention of the caps in Article 5 of the IFR.
While we do not usually publish details of the information notices we issue to regulated persons, in the interests of transparency, we are publishing details of the content of these notices. This is because we asked for information on payments received or paid by individual issuers and acquirers.
What information do the notices require?
The information notices require each party to provide information in relation to a sub-set of issuers and acquirers for the period from around the start of 2015 to around the end of 2017 relating to:
- The value of a sub-set of IFR regulated consumer debit, prepaid and credit card transactions
- The volume of a sub-set of IFR regulated debit, prepaid and credit card transactions
- Payments between the card scheme (including its processing entity) and the issuers (in both directions)
- Payments between the card scheme (including its processing entity) and the acquirers (in both directions)
- Payments between the acquirers and issuers
We also require a description of material changes year-to-year to the payments listed above.
The scope of the information notices excludes interchange fees (we issued a separate information notice to collect information on those payments) and payments that are outside the scope of the IFR, including:
- Payments that are exclusively attributable to transactions where the point of sale is not located in the UK
- Payments that are exclusively attributable to ATM transactions
- Payments that are exclusively attributable to commercial card (as defined in Article 2(6) IFR) transactions
- Payments that are exclusively attributable to transactions where one of the issuer or acquirer (or both) is (are) located outside the EEA.
The sub-set of IFR regulated card transactions covered by the information notice are those consumer debit, prepaid and credit card transactions where the point of sale and at least one of the issuer or acquirer are located in the UK. Both issuer and acquirer must be located in the EEA in accordance with the scope of the IFR.
Deadline for responses
The information notices require the parties to provide the information described above by 18 September 2018.
What happens next?
We will use the information we receive to inform our work to monitor compliance with the IFR caps, including the prohibition on circumvention of the caps.
If we find that a regulated party has failed to comply with an obligation imposed by the IFR, we have the power to take enforcement action where appropriate. This includes the power to publish details of a compliance failure or impose a financial penalty for the compliance failure and publish details of that penalty.
We intend to collect similar information from the parties each year. This year, we have contacted Visa and Mastercard to gather this information. We may change the identity of the organisations that are required to provide the information in future years. We have selected a sub-set of issuers and acquirers in relation to which the parties must provide data on payments this year. We may also change the identity of the sub-set of individual issuers and acquirers who are covered by the information requests.
Our guidance sets out the approach that the PSR will generally apply in relation to its functions as the lead competent authority for the IFR in the UK.