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Regulation of the European Parliament and interchange fees for card-based payment transactions

By Jan Byrski
Posted: 26th November 2015 11:43
The Regulation (EU) 2015/751 of the European Parliament and of the Council of 29 April 2015 on interchange fees for card-based payment transactions (hereinafter: the Regulation, IF Reg), is the European Union’s (EU) first legal act to regulate the issue of the functioning of payment card schemes in respect of card-based payment transactions.
The Regulation has been adopted with the purpose of eliminating the obstacles to the proper development of an integrated non-cash payment market, with no distinction between domestic and cross-border payments within the EU.  The aforementioned goal is accomplished primarily by adopting, at the EU level, the same maximum level of the interchange fees (IF) for both debit (0.2%) and credit (0.3%) card transactions, understood as both card present and card not present transactions, i.e. including payment transactions that are initiated with the use of a card-based payment instrument such as a payment application, token or smartphone.  The Member States, as regards the domestic transactions, may define a lower per transaction interchange fee cap.  Up until now, the individual Member States’ approach to the regulation of the IF caps has varied significantly.  Some countries (like for example Poland) have already defined the maximum IF caps, other have left this issue to the self-regulation of market members or to the regulation at an individual level by decisions of proper authorities.  This resulted in a growing contrast between the conditions of maintaining an economic activity on the card market in different Member States, especially regarding the provision of services by the acquirer.
The work on the adoption of the Regulation has its origins also in the persistent proceedings before the European Commission against two four party card organizations (Visa and MasterCard) concerning the setting of multilateral interchange fees for cross-border payment transactions within the EU.  The proceeding against MasterCard was concluded with a judgement by the Court of Justice of the European Union (CJEU) of 11 September 2014, C-382/12 P, in which the CJEU found that the setting of multilateral interchange fees in the payment system operated by the MasterCard organization violated the rules of EU’s competition law.  As for the Visa organization, the proceeding before the EC concluded with entering into an agreement with Visa regarding the IF caps for multilateral interchange fees within the EU – this agreement was approved by the Decision of the EC of 26 February 2014, AT.39398 Visa MIF, No 2014/C 147/06.  This issue was also of interest to national offices of competition and consumer protection – related proceedings took place i.e. in Poland, Hungary and Spain.  These proceedings have, however, shown the ineffectiveness of competition law in regard to the card market (see recital 12 of the Regulation’s preamble), which led the EU legislator to the conclusion that it is necessary to regulate the fundamental aspects of the functioning of this market in a legal act at the EU Regulation level.
The Regulation sets forth the uniform technical and business requirements for card-based payment transactions carried out within the EU, where both the payer’s payment service provider (PSP) and the payee’s PSP are located therein.  The Regulation thus, contrary to its name, regulates not only the problem and caps of the IF but also a broad spectrum of issues connected with the functioning of the card-based payment transactions.
Among the most important rules of the Regulation is the prohibition of all and any territorial restrictions within the EU in licensing agreements or in payment card scheme rules for issuing payment cards or acquiring card-based payment transactions.  Chapter III of the IF Reg covers also the obligations of card market members related to co-badging (the inclusion of at least two payment brands (e.g. Visa and MasterCard) or payment applications of the same brand on the same card-based instrument (e.g. one card [co-badged card], telecommunication, digital or other technological device)).
Article 9 of the IF Reg introduces an obligation regarding the contents of a contact between the acquirer and the payee.  The contract shall include individually specified information on the amount of the merchant service charges (MSC), IF and scheme fees applicable with respect to each category and brand of payment cards.  It is therefore prohibited to specify the information on the amount of the MSC, IF and scheme fees applicable in a collective manner with respect to all categories and brands of payment cards (so called blended fee).  The acquirer may be released of this obligation at the payee’s express – subsequent to entering into a contract – written request.
According to article 10 (1) of the IF Reg, payment card schemes and payment service providers shall not apply any rule that obliges payees accepting a card-based payment instrument issued by one issuer also to accept other card-based payment instruments issued within the framework of the same payment card scheme (the ‘Honour All Cards’ rule).  This means that one cannot impose on the payee the obligation to accept different card-based payment instruments within the framework of the same payment card scheme.  It is therefore up to the payee to decide for example whether or not to accept not only transactions with “cheaper” cards (e.g. debit card, prepaid card) but also those with the “more expensive” cards (e.g. credit card, business card).
Article 11 IF Regulation introduces further restrictions on the freedom of contract between payment card schemes and its contractors as well as between card acquirers and payees.  It prohibits the inclusion, in licensing agreements, in scheme rules applied by payment card schemes and in agreements entered into between card acquirers and payees, of any rule preventing payees from steering consumers (payers) to the use of any payment instrument preferred by the payee.  As such, it is primarily of relevance to the payment card scheme – issuer and acquirer – payee relationships.  Recital 35 of the Regulation’s preamble states: ‘Payment instruments entail different costs to the payee, with certain instruments being more expensive than others.  Except where a particular payment instrument is imposed by law for certain categories of payments or cannot be refused due to its legal tender status, the payee should be free, in accordance with Directive 2007/64/EC, to steer payers towards the use of a specific payment instrument.  Card schemes and payment service providers impose several restrictions on payees in this respect, examples of which include restrictions on the refusal by the payee of specific payment instruments for low amounts, on the provision of information to the payer on the fees incurred by the payee for specific payment instruments or limitation imposed on the payee of the number of tills in his or her shop which accept specific payment instruments.  Those restrictions should be abolished.’
The aforementioned steering may take the form of discouraging the use of certain payment instrument, e.g. when the payee refuses to accept specific payment instruments for low sums (negative steering) or the form of encouraging the use of certain payment instrument (e.g. by awarding, in case of the payer selecting the preferred payment method, a discount, coupon or reward points which can be traded for products or services).
Steering may also take the form of charging by the payee additional fees for choosing a non-cash payment method (surcharge fees).  It is a form of negative steering.  Presently, the Regulation does not exclude the charging of the surcharge fee, unless a Member State has chosen to prohibit it on the grounds of the right stemming from article 52 (3) of the PSD Directive.
The Regulation was published on 19 May 2015 (Official Journal of the EU, L 123) and entered into force on 8 June 2015.  From that same day its regulations apply with the exception of:

1) Article 3 (interchange fees for consumer debit card transactions), Article 4 (interchange fees for consumer credit card transactions), Article 6 (licensing), Article 12 (information to the payee on individual card-based payment transactions) – which shall apply from 9 December 2015 and;
2) Article 7 (separation of payment card scheme and processing entities), Article 8 (co-badging and choice of payment brand or payment application), Article 9 (unblending), Article 10 (‘Honour All Cards’ rule) – which shall apply from 9 June 2016.

The Regulation is binding in its entirety and is directly applicable in all the Member States.
Jan Byrski, Ph.D, Partner in Traple Konarski Podrecki and Partners.  Assistant Professor in the Civil and Business Law Department at the Cracow University of Economics.
Mr. Byrski specializes in the law of financial institutions and payment services (FinTech), personal data protection, including proceedings before the President of the National Bank of Poland, the Chairman of the Polish Financial Supervision Authority and the Inspector General for Personal Data Protection.  He is an expert for the Non-cash Trade Development Foundation and the Polish Insurance Association.
He participated in parliamentary works on amendments to the Act on Payment Services and the Act on Personal Data Protection.
Mr. Byrski is author and co-author of many publications, including the first polish commentary on the IF Regulation.

Jan can be contacted on (+48) 12 426 05 30 or by email at

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