Compliance Article
10/01/2008
|
Visa® USA (Visa) recently amended its operating rules. These amended rules affect card issuers that enable Non-Visa Debit Transaction processing. This article will explain the changes and help you determine whether your financial institution is affected. Most importantly, these rule changes may affect your cardholder agreements – or other account opening disclosures – and could require your financial institution to provide cardholders with an annual mailing.
Background
Prior to these rule changes, Visa allowed certain bill payment products and certain merchants to initiate payment transactions through non-Visa networks without a personal identification number (PIN). All other transactions initiated by cardholders on non-Visa networks required cardholders to enter a PIN.
In response to an anti-trust inquiry by the Department of Justice (DOJ) and several state attorneys general, Visa amended its operating rules to make PIN-less non-Visa transactions more widely available. The DOJ’s press release provides more detail.
A summary of the Visa Rules
The new rules allow an issuer to permit a cardholder to initiate a Visa debit card transaction on a non-Visa network without a PIN anywhere the card is accepted. However, Visa requires a card issuer permitting such transactions to satisfy several requirements. Under the Visa rule, financial institutions that enable Non-Visa Debit Transaction processing must provide cardholders with certain disclosures. The disclosures must include:
- A list of the debit networks for which such transactions are enabled
- Examples of the types of actions a cardholder may be required to make to initiate a Visa transaction, and
- A statement that certain provisions (such as the Visa zero-liability program) do not apply to such non-Visa transactions
The Visa rule also requires that these disclosures be provided on an annual or more frequent basis.
The rule was effective July 1, 2008. For institutions that enabled Non-Visa Debit Transaction processing prior to July 1, 2008, there is a January 1, 2009 mandatory compliance date. For institutions that did not enable Non-Visa Debit Transaction processing prior to July 1, 2008 – but plan to – must provide Visa with a 30-day notice prior to implementation. Visa Rule 1.10 et seq. provides substantial penalties for non-compliance.
The rule only appears to affect consumer debit cards as its discussion is limited to Visa Check Cards and Visa Debit Cards. In other words, Visa Business Check Cards do not appear to be affected.
Determining whether your financial institution is affected
Determining whether a financial institution has enabled Non-Visa Debit Transaction processing appears to be dependant on the network an institution uses. In other words, if your network has enabled Non-Visa Debit Transaction processing, then you have too. Stated more broadly, all financial institutions that use that network have enabled Non-Visa Debit Transaction processing and thus need to comply with the Visa rule.
For example, let’s say your network offers a PIN-less bill payment product. A merchant that uses the same network offers that payment option in its online payment environment. One of your cardholders goes to that merchant’s web site and chooses that payment option because she sees the payment option has the same logo as she has on her card. Your institution has to honor that PIN-less bill pay transaction because you agreed to do so when you subscribed to your network. As a result, your institution has enabled Non-Visa Debit Transaction processing.
We are aware of the following networks that offer a PIN-less payment option: STAR, PULSE, NYCE, COOP, and ACCEL/Exchange.
Action steps
We recommend taking the following actions:
- Go to the Visa web site and review the Visa rule;
- Review information from your network provider or contact your network provider to determine if they offer a PIN-less payment option covered by the Visa rule; and
- If you are affected:
- Update your cardholder agreement, Reg E disclosure, or other documentation you typically use to disclose these types of Visa cardholder requirements, and
- Plan your annual mailing.
Drafting tip
One of the Visa disclosure requirements is to include examples of the types of actions a cardholder may be required to make to initiate a Visa transaction. In discussions with our financial institution customers, we determined that it may be equally, if not more, valuable to cardholders to also include examples of the types of actions a cardholder may be required to make to initiate a non-Visa transaction.
A note about Visa rule changes
Financial institutions are encouraged to direct questions about the interpretation of the Visa rule to Visa. Financial institutions are further encouraged to check with their network providers to determine/confirm whether the network offers Non-Visa Debit Transaction processing as defined by Visa. Wolters Kluwer Financial Services is not a financial institution and as a result is not a Visa member. While the Visa rules are available online, we rely on our financial institution customers to provide us with information from Visa interpreting its rules. We also encourage financial institutions to work with counsel and/or compliance personnel before taking any final action with regards to a Visa rule.
