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Visa Says FTC Requested Information on Possible Durbin Violations

Date : 11/16/2012 @ 7:46PM
Source : Dow Jones News
Stock : Discover Financial Services (DFS)
Quote : 61.06  -1.49 (-2.38%) @ 2:50AM
Department 56 share price Chart

Visa Says FTC Requested Information on Possible Durbin Violations

Visa (NYSE:V)
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By Andrew R. Johnson

The Federal Trade Commission has asked Visa Inc. (V) for information regarding possible violations of new rules for debit-card processing that took effect under the Dodd-Frank Act, the company said Friday.

The FTC's Bureau of Competition made the request in a Voluntary Access Letter on Sept. 21, which asked Visa to supply documents and information on a voluntary basis, the Foster City, Calif.-based company disclosed in its annual 10-K report filed with the Securities and Exchange Commission.

Visa said the request focuses on the "purposes, implementation, and impact of" its "optional PIN Debit Gateway Service." The company said it is cooperating with the bureau, and that revenue from the service is not material.

Spokesmen for Visa in California could not immediately be reached for comment Friday morning.

The FTC letter is the latest move by regulators to probe Visa's response to the Durbin amendment, a provision of 2010's Dodd-Frank Act that ushered in new limits on fees merchants pay to accept debit cards and new requirements for how debit-card transactions are processed.

The U.S. Justice Department has been investigating business-practice changes Visa made in response to the act, the company disclosed in May.

Earlier this year, Visa rolled out a new pricing strategy intended to protect its dominant share in the debit-card market in response to a part of the regulation that took effect in April that requires banks to include multiple processing networks on their cards.

Visa and its largest competitor, MasterCard Inc. (MA), do not lend or issue cards to consumers; rather, they operate processing networks that handle transactions for banks that issue their cards and banks that work with merchants.

In the past, a card-issuing bank might have used Visa exclusively to process debit transactions authorized with a consumer's signature and Visa's Interlink debit network to authorize transactions made with a PIN. Such deals are no longer allowed under the Durbin amendment, meaning that the same bank had to either add a PIN debit network that isn't operated by Visa, such as MasterCard's Maestro network, to its cards or replace Interlink entirely with a different provider.

The intent was to give merchants more control over their processing costs by giving them more options over which networks to route the transactions made in their stores.

Visa's new pricing strategy includes a fixed fee that must be paid to plug into Visa's network, variable fees on each transaction and incentive payments to merchants--a move meant to entice merchants to continue routing transactions through Visa.

Visa also launched a service enabling it to process PIN debit transactions even if its PIN debit network is not equipped on a bank's debit cards. The move has concerned some of its competitors, such as Discover Financial Services (DFS), which operates a competing PIN debit network called Pulse.

Discover said in October that the DOJ asked it for information about possible antitrust violations by another party, which analysts have said is likely Visa.

Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com



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