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2012 Interchange Update

CHANGES TO US INTERCHANGE EFFECTIVE ON APRIL 13, 2012

U.S. Region

Dear Sterling Customer, Thank you for choosing Sterling as your payment provider. We appreciate your business and strive to keep you fully informed of all changes made by the Payment Brands. Visa®, MasterCard® and Discover® have announced program modifications effective April 13, 2012 (unless otherwise noted). This letter serves as your formal notification of these modifications, which will be passed through to you pursuant to your Sterling Merchant Agreement. Please see the list of relevant changes below: Please refer to the Adjusted Interchange Categories for more information on the updated Visa, MasterCard and Discover interchange rates.

Visa Revisions:

  • Visa will introduce a new Transaction Integrity Fee under their U.S. Custom Payment Service (CPS) program. The $0.10 fee will be assessed for each regulated and exempt (non-regulated) U.S. domestic Visa Debit and Prepaid card purchase transaction that does not meet CPS qualification.
    • Sterling will assign a new mnemonic (V38N), which will apply to Visa non-CPS qualified Debit and Prepaid Regulated transactions. The existing mnemonic (V338) will continue to apply to CPS qualified Debit and Prepaid Regulated transactions.
  • Visa will introduce a Fixed Acquirer Network Fee (FANF), previously referred to as the Network Participation Fee, on April 1, 2012. It will be imposed on merchants that accept Visa-branded products processed through the Visa network. Sterling will assess this fixed fee (i.e. not a per transaction fee) monthly, based on combinations of the following variables:
    • Acceptance method (card present versus card-not-present)
    • Merchant Category Code (MCC)
    • Merchant Taxpayer ID
    • Number of merchant locations with sales (for card-present merchants) or gross Visa sales volume (for card-not-present merchants) during the reporting month
    The monthly fee Sterling will pass along to your company is based on the three charts.
    Click here to see the charts
    Sterling will begin billing this fee in May 2012 based on each merchant's number of locations or sales volume in April 2012. We will continue billing the fee monthly thereafter, based on the preceding month's number of locations or volume.
  • On April 1, 2012, the Visa Authorization Processing Fee (APF) will be separated into two fees and renamed. The fee for Visa debit authorizations will be lowered, as follows.
    • Authorization Processing Fee (APF) - Debit will apply to Visa debit authorizations and will be lowered to $0.0155.
    • Authorization Processing Fee (APF) - Credit will apply to Visa credit authorizations and remain at $0.0195.
  • Effective April 1, 2012, Visa will eliminate the Risk Identification Fee (RIS) that is currently applied at $0.001 to Visa sales transactions.
  • Visa will modify several existing interchange rates including categories such as CPS Consumer Debit (card present and card not present), CPS Prepaid, non-Travel & Entertainment (T&E) Commercial (Business, Corporate and Purchasing), and Commercial Refund rate.
  • Visa will implement three new interchange programs for Business debit cards for both T&E and non-T&E transactions. These programs will apply to U.S. domestic exempt debit transactions.
  • Two new T&E interchange programs will be introduced for Visa U.S. domestic Corporate and Purchasing card transactions previously qualifying under the Commercial Card Electronic interchange program. These rates will apply to the following Merchant Category Codes (MCCs):
    • 4112 - Passenger railways
    • 4411 - Steamship and cruise lines
    • 4511 - Airlines and air carriers
    • 4722 - Travel agencies and tour operators
    • 5812 - Eating places and restaurants
    • 5814 - Fast food restaurants
    • 7011 - Lodging (hotels, motels and resorts)
    • 7512 - Automobile rental agency
  • Visa Consumer Debit and Consumer Prepaid exempt card transactions from T&E merchants will no longer be eligible for the CPS/Retail Debit or CPS/Retail Prepaid interchange programs. Instead, if data requirements are met, transactions will be eligible for existing T&E categories such as CPS/Hotel Debit & Prepaid.
  • Visa will expand its Level III program by implementing a new Corporate Level III interchange program for non-T&E transactions. Corporate Card transactions that are CPS qualified will now be eligible for Corporate Level III if Level III data is submitted. Non-CPS qualified corporate card transactions with Level III data will now qualify at the Corporate Electronic with Data rate.
  • Visa will no longer allow card-present transactions to be eligible for the interchange programs listed below. Card-not-present transactions that meet CPS requirements will continue to qualify for these rates.
    • CPS/Debt Repayment
    • CPS/Tax Payment Debit
    • CPS/Utility Debit (including Business Debit)
  • Eligibility requirements will be modified for the CPS/Retail 2 program for transactions from merchants in certain MCCs as follows:
    • 9211, 9222, 9399 - Government
    • 8211, 8220, 8299 - Schools
    • 5960, 6300 - Insurance
    • 4899 - Cable and Other Pay TV
    • 8351 - Child Care
    • 5983 - Fuel Dealers
    • 5968 - Subscriptions
    • 4814 - Telecommunication Services
    • 6513 - Real Estate Agents and Managers, Rentals
    With this change, transactions must first meet interchange requirements for one of the existing interchange programs, listed below, to be eligible for the CPS/Retail 2 rate.
    • CPS/Retail*
    • CPS/Retail Key Entry*
    • CPS/Retail Key Entry*
    • CPS/Electronic Commerce-Basic
    • CPS/Electronic Commerce-Preferred
    *Consumer debit and prepaid transactions qualifying at these categories are not eligible for CPS/Retail 2.
  • Visa has introduced a new commercial card product and interchange program called Visa Large Purchase Advantage. These new card products will receive one of four new interchange rates (based on transaction amount) and will apply to non-T&E transactions starting at $10,000.01.
  • In December 2011, Visa eliminated the $1000 registration fee to participate in the Purchasing Card Large Ticket program. Effective April 13, 2012, Visa will no longer require merchant registration for this program and will modify the interchange rate. This rate will apply to non-T&E transactions greater than $4,105.88 if Level III data is submitted.
  • Quasi-cash transactions (such as money orders, traveler's checks, gaming chips, or wire transfers) made with exempt Visa consumer debit cards, prepaid cards or business debit cards will now be eligible for CPS interchange programs provided interchange requirements for the program are met.
  • Visa will expand chargeback protection limits for car rental merchants under Reason Code (RC) 72 - No Authorization. Chargeback’s will be valid only for the amount that exceeds the authorized amount, plus 15% or $75, whichever is greater.
  • Currently, Visa assigns Electronic rates to non-CPS qualified Business credit transactions from non-Travel Service merchants with Level II data. Effective April 13, 2012, Visa will qualify these transactions at Standard rates.

MasterCard Revisions:

  • MasterCard will modify several Commercial interchange rates for both Corporate and Purchasing cards.
  • MasterCard will introduce the Small Ticket regulated interchange program for the following MCCs: 5814 - Fast Food Restaurants and 7841 - Video Entertainment Rental Stores. This program will apply to card-present, regulated debit transactions $10 or less.
  • MasterCard will expand the Small Ticket and Convenience Purchases interchange programs to include Variety Stores (MCC 5331).
  • MasterCard will retire several chargeback RCs and has indicated replacement RCs for each as follows:

  • Retired Reason Code: Replacement Reason Code:
      35 - Card Not Valid or Expired   08 - Requested/Required Authorization Not Obtained
      47 - Requested Required Authorization Not Obtained and Fraudulent Transaction   08 - Requested/Required Authorization Not Obtained
      57 - Card-Activated Telephone Transaction   31 - Transaction Amount Differs
      62 - Counterfeit Transaction Magnetic Strip POS Fraud   Fraud RC may vary based on transaction details

  • Last year, MasterCard announced that merchants participating in SecureCodeTM would not be liable for fraud-based chargeback’s (listed below), provided the merchant attempts authentication and the issuer approves the transaction. Effective April 13, 2012, MasterCard will block issuer chargeback’s for transactions qualified as "merchant UCAF."
    • 37 - No Cardholder Authorization
    • 63 - Cardholder Does Not Recognize-Potential Fraud
  • MasterCard will reduce the time merchants have to submit manually-recorded transactions (such as those created with a voice authorization) to avoid chargeback RC 42 - Late Presentation. That time will be reduced to a maximum of 14 calendar days from the transaction date.
  • MasterCard will expand issuance of the World Elite MasterCard to issuers in the Asia/Pacific and South Asia/ Middle East/Africa regions. These transactions will qualify for existing inter-regional interchange rates.
  • MasterCard will introduce two new cards, MasterCard Corporate Prepaid and MasterCard Corporate Prepaid Travel, in Australia and New Zealand. These transactions will qualify for existing interregional interchange rates.
  • MasterCard will introduce a new consumer card, MasterCard World Black, which can only be issued in Europe. These transactions will qualify for existing interregional interchange rates.

Discover Revisions:

Please note these changes apply to all Discover Network cards including Discover, Discover Diners, JCB and China Union Pay.
  • Discover will increase the Assessment Fee from 0.10% to 0.105% for U.S. sales transactions.
  • Discover will introduce a new interchange program, the U.S. Commercial Large Ticket, which will apply to transactions greater than or equal to $5000.00 for specific non-T&E MCCs, Both card-not-present and card-present commercial card transactions will be eligible.
  • The Discover International Processing and International Service Fees now apply to JCB and China Union Pay cards.
  • Discover will modify the minimum amount for disputes from $10.00 to $0.01 for all cards and Dispute Reason Codes.
  • Discover will expand eligibility of the Prime Submission Level (PSL) Express Services interchange program to include Misc. Food Stores (MCC 5499). Additionally, the rates for this program will be modified.
  • Discover will adjust which MCCs are eligible for the Recurring Payments consumer interchange program. Child Care Services (8351) and Charitable and Social Service Organizations (8398) will be added. Telecommunications Equipment (4812), Direct Marketing - Insurance Service (5960) and Insurance Sales, Underwriting and Premiums (6300) will be removed.
  • Discover will remove Restaurants (MCCs 5812 & 5814) from eligibility for PSL Card Not Present/e-Commerce and Key Entry consumer interchange programs, when the card product accepted is Premium or Premium Plus. Additionally, Discover has renamed the "PSL Key Entry" interchange program to "Key Entry Submission Level."
  • Discover will alter timeframes for various chargeback actions, as outlined below. Some dates may vary based on chargeback reason code.

  •  Action  From  Previous Timeframe  New Timeframe
     Initiate Chargeback (Credit Products)  Issuer  180 Days  120 Days
     Initiate Chargeback (Ticket Retrieval Close Date)  Issuer  N/A  60 Days
     Initiate Dispute Arbitration (Post Pre-Arbitration)  Merchant  45 Days  60 Days
    Initiate Representment Request  Merchant  50 Days  39 Days

  • Discover will launch a new Ticket Retrieval Request process (combining both Inquiry and Dispute Ticket Retrieval requests under the same category). The following new retrieval reason codes will identify the nature of the dispute
    • RC 01 Transaction Documentation Request
    • RC 02 Transaction Documentation Request T&E
    • RC 03 Transaction Documentation Request Due to Cardholder Dispute
    • RC 04 Transaction Documentation Request for Fraud Analysis
    • RC 05 Good Faith Investigation
  • If a merchant does not respond to a Ticket Retrieval Request within 21 days, one of the following new chargeback RCs may result. These chargeback RCs cannot be represented.
    • NR - Non-Response to Ticket Retrieval Request
    • UNR - Fraud - Non-Response to Ticket Retrieval Request
  • Discover will add the following chargeback RCs:
    • AA - Does Not Recognize (cardholder does not recognize transaction)
    • AT - Authorization Non-Compliance
  • Discover will consolidate RCs for chargeback’s (from 16 into five).
     Current Reason Codes  New RC  Description
     DA, NA, EX (Credit Products)  AT  Authorization Non-Compliance
     RN1  SW  Altered Amount
     U01, U02, U03, U32, U99  U03  Processing Error - Fraudulent Transaction
     U11, U18, U21, U23, U28  U01  Fraud - Card Present Transaction
     U31, U38  U02  Fraud - Card Not Present Transaction

    Discover will also eliminate the following chargeback RCs:
    • U12 - Swiped Card Transaction - Invalid Signature
    • U22 - Keyed Card Transaction - Invalid Cardholder Signature Obtained
  • Discover will add a new term which requires a merchant to submit the card expiration date with each authorization request. If not submitted, the transaction may be subject to a dispute.
  • Discover will no longer support biometric payment devices.
  • Discover will allow Zero Dollar Status Checks to be submitted with or without an address verification. Previously, an address was required.

As always, we have made every effort to minimize the impact of these changes to your system and have modified our platforms to accommodate these revisions. Should you have any questions regarding this communication, please contact your Sterling account representative for more information.

Your business is important to us, and we are here to assist you.

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