Visa Confirms the FTC Is Probing Its Debit Transaction Routing Practices

Confirming rumors that the Federal Trade Commission is looking into issues involving debit card transaction routing, Visa Inc. late last week reported the Federal Trade Commission has asked it to voluntarily provide information about its routing practices.

In a brief notice in its fiscal 2019 report to the Securities and Exchange Commission, Visa said the FTC’s Bureau of Competition on Nov. 4 “requested that Visa provide, on a voluntary basis, documents and information for an investigation as to whether Visa’s actions inhibited merchant choice in the selection of debit payments networks in potential violation of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Visa is cooperating with the Bureau.”

Bloomberg Law first reported the probe and said the FTC was looking into Mastercard Inc.’s routing practices also. Contacted by Digital Transactions News, a Mastercard spokesperson declined to comment beyond that report. An FTC spokesperson also declined comment.

Citing anonymous sources, Bloomberg said Visa, Mastercard, and some large debit card issuers were blocking retailers from routing some mobile-wallet and tap-to-pay (contactless) transactions from reaching PIN-debit networks. The Federal Reserve regulation implementing the Durbin Amendment says merchants must have a choice of at least two unaffiliated networks for debit transaction routing.

This isn’t the first time the FTC has looked into debit routing. Visa modified its EMV chip card routing policies in the wake of a 2016 FTC probe.

While not claiming first-hand knowledge of the new inquiry, Mark Horwedel, a strategic consultant at CMS Payments Intelligence Ltd., a United Kingdom-based firm that researches payments-pricing issues, says many merchants believe the Durbin requirements have only been applied to point-of-sale debit transactions, not for card-not-present purchases.

“The merchant community has been upset for quite some time that the Durbin routing requirements have not been enforced for payment venues other than face-to-face,” Horwedel says. Merchants regard the amendment as also applying to “every other payment, including Internet,” he says. 

Horwedel is the former chief executive of the Merchant Advisory Group, an association of mostly large merchants concerned with payments issues. 

Spokespersons for the MAG as well as another merchant group, the Retail Industry Leaders Association, confirmed to Digital Transactions News last week that their organizations had been in contact with the FTC, but they declined to give details.