FRB Clarifies Regulation II Regarding Card-Not-Present Debit Transactions

The Federal Reserve Board released proposed revisions to Regulation II to clarify that card-not-present debit card transactions must have two unaffiliated payment card networks available. The changes are related to the growth in online commerce which increased the volume of card-not-present debit card transactions.

Most of the clarification comes from changes to 235.7 and its associated commentary, which prohibits network exclusivity and routing restrictions.

The new wording reads, “(2) Permitted arrangements. An issuer satisfies the requirements of paragraph (a)(1) of this section only if, for every geographic area, specific merchant, particular type of merchant, and particular type of transaction for which the issuer’s debit card can be used to process an electronic debit transaction, such issuer enables at least two unaffiliated payment card networks to process an electronic debit transaction, and where each of these networks has taken steps reasonably designed to be able to process the electronic debit transactions that it would reasonably expect will be routed to it, based on expected transaction volume”

Question of the Week

Q. Are there any IRS reporting requirements if the credit union plans to give each new member a $25 cash gift in connection with opening a new share deposit account?

A. Yes. A cash gift pair or credited to a member in relation to the opening of a credit union deposit account is considered interest. When the interest paid to the member by credit union (or the fair market value of merchandise given) exceeds $10 within a calendar year, a 1099-INT is required. Therefore, the credit union would need to complete form 1099-INT for each member who received the $25 cash gift.

Related Links

IRS Code 1.6049-5
IRS Form 1099-INT

Compliance Alerts

National Credit Union Administration

Federal Financial Regulators to Hold Webinar on Emergency Capital Investment Program: The NCUA is co-hosting an “Ask the Regulators” webinar to provide information about the Treasury Department’s Emergency Capital Investment Program. Under the Emergency Capital Investment Program, Treasury will provide up to $9 billion in capital directly to depository institutions that are certified Community Development Financial Institutions or minority depository institutions. This funding may be used to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers—especially those in low-income and underserved communities—that may be disproportionately impacted by the economic effects of the COVID-19 pandemic.

NCUA, CDFI Fund to Co-host Webinar on Small-Dollar Loan Program: Credit unions are invited to learn more about the Department of the Treasury’s Community Development Financial Institutions Fund’s Small-Dollar Loan Program during a webinar scheduled for Thursday, May 27, beginning at 2 p.m. EDT. Staff from the NCUA and the CDFI Fund will describe the program and discuss eligibility and permissible uses of these funds. A question-and-answer session will follow the presentation. Credit unions should review the CDFI Fund’s Small-Dollar Loan Program Webpage, including information about the application process and timeline.

Registration Now Open for NCUA, CISA Cybersecurity Webinar: The NCUA will host a webinar on May 26 to provide credit unions with information on protecting their organizations and members from cyberattacks. Topics that will be covered include identifying risks to products, services, and assets; monitoring the security network; managing third-party cyber risks; implementing controls to protect and, if necessary, recover data; and monitoring and protecting against malware attacks.

Consumer Financial Protection Bureau

CFPB Issued Additional TRID FAQs: The CFPB issued additional TRID FAQs to address housing assistance loans, and how the BILD Act impacts the TRID requirements for certain housing assistance loans.

Internal Revenue Service

IRS Announces Families of 88 Percent of Children in U.S. to Automatically Receive Monthly Payment of Refundable Child Tax Credit: The IRS and the U.S. Department of the Treasury announced today that the first monthly payment of the expanded and newly-advanceable Child Tax Credit (CTC) from the American Rescue Plan will be made on July 15. Roughly 39 million households — covering 88% of children in the United States — are slated to begin receiving monthly payments without any further action required. IRS and Treasury also announced the increased CTC payments will be made on the 15th of each month unless the 15th falls on a weekend or holiday. Families who receive the credit by direct deposit can plan their budgets around receipt of the benefit. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.

Office of Foreign Assets Control

OFAC has updated the SDN list as of May 17. The last update prior to this was April 30.

Questions? Contact the Compliance Hotline: 1.800.546.4465;

Posted in Compliance News, Compliance Question.