EU Parliament Votes To Limit Interchange Fees

The European Parliament voted overwhelmingly on Tuesday (March 10) to cap payment card interchange fees for consumer payments, according to Finextra.

The 621-to-26 vote came after a deal was struck in December between lawmakers and the EU Council to set the caps at 0.2 percent for debit and 0.3 percent for credit transactions and also set limits on Visa and MasterCard’s “Honor All Cards” rule. For consumer debit cards, the new rules also allow individual EU member states to set lower percentage caps and impose maximum fee amounts.

However, commercial payment cards that are used only to pay for business expenses are exempt from the caps, and so are three-party card schemes like American Express and Diners Club. (After three years, the new regulations will also apply to three-party card schemes that license other parties to issue cards, so they’re effectively operating as four-party schemes.)

The European Commission said it estimated that the new rules could reduce hidden fees for consumer payment cards by about €6 billion ($6.4 billion). The new rules must still be approved by the EU Council, which is expected to take place before summer arrives.

“This legislation will put a cap on interchange fees, make them more transparent and remove a hurdle to rolling out innovative payment technologies,” said EU Commissioner Margrethe Vestager, who’s in charge of competition policy for the Commission, according to Finextra. “It is good for consumers, good for business and good for innovation and growth in Europe. As cards are the most widely used means of online payment, this regulation is also an important building block to complete the European Digital Single Market.”

The EU Parliament vote comes after almost two years of wrangling over a revised version of the Payments Services Directive (PSD2) approved in 2013 by the European Commission. It also comes after a series of legal setbacks for card brands, including one by the European Court of Justice that MasterCard’s interchange fees violate antitrust laws.

Pre-cap interchange rates vary widely across the Euro zone. According to the EC, in 2013 Visa credit interchange rates ranged from 1.8 percent in Germany to less than 0.5 percent in France, while Visa debit rates topped out above 1.7 percent in Germany, but dropped to 0.2 percent or less in nine countries.