European Parliament Caps Interchange
March 12, 2015
The European Parliament on Tuesday passed legislation backing caps on interchange rates on domestic and cross-border credit- and debit-card transactions in Europe. With the vote, Parliament cements a September ruling by the European Commission (EC) that found MasterCard and Visa had violated EC antitrust rules in how they set cross-border interchange within the European Union. The agreement caps interchange rates at 0.2 percent per transaction for debit-card purchases and 0.3 percent for credit cards. The legislation passed by a vote of 621 to 26, with 29 abstentions.
“This legislation, combined with the upcoming Payment Services Directive, will establish a level playing field for payments across Europe,” said Spanish Member of Parliament Pablo Zalba, who took the lead on the legislation. “It should enhance fee transparency, stimulate competition and enable both retailers and users to choose the card schemes that offer them the best terms.”
In addition to the interchange caps, the new law allows some flexibility for member states to set lower caps. It also exempts “three-party” schemes like American Express that serve as both issuing and acquiring bank. For the next three years, even if such a three-party scheme licenses out their issuing, the exemption remains in place, part of the legislation Javier Perez, president of MasterCard Europe said “disturbed” the company.
“At the same time,” Perez said, “we believe that the simple fact we now have an agreement will bring some necessary legal certainty for the fast changing payments market, which will help us all build a world beyond cash.”