FTC seeks details from Visa on debit card service

[November 17, 2012]  NEW YORK (AP) -- The Federal Trade Commission is looking at the details of one of Visa's debit card programs to see if it complies with new rules under the 2010 financial regulatory reform law.

Visa Inc. said Friday in a regulatory filing that the FTC asked for information about a voluntary program for merchants that accept debit cards with the Visa logo, on Sept. 21.

"The request focuses on information related to the purposes, implementation, and impact of the optional PIN Debit Gateway Service," the San Francisco-based payment processor said in a Securities and Exchange Commission filing that details its fiscal year financial results.

The request indicates the FTC wants to determine if the program violates a provision of financial reform known as the "Durbin Amendment," which limits how much merchants who accept cards can be charged to process the payments.

Barclays analyst Darrin Peller said in a note that the PIN Debit Gateway Service is an optional service that Visa provides to banks that process card transactions and want to route some transactions to other networks besides Visa, but do not have connections to those networks. "While we believe the FTC is just seeking to gain a greater understanding around the offering (given that it is not usually involved in the payments space), it is worth noting that PIN Debit Gateway Service does not contribute a meaningful amount of revenue to Visa," the analyst wrote.

Barclays has a "Neutral" rating and a $155 price target on Visa stock.

Earlier this year Visa disclosed that the Department of Justice is investigating moves it made around the time the Durbin Amendment took effect that were aimed at limiting its losses related to the law. In Friday's filing Visa said it is continuing to provide materials and to cooperate with the agency's information requests related to that probe.

The Federal Reserve set the new fee limits in the summer of 2011, following a bitter fight involving credit card processors like Visa and MasterCard, banks and merchant groups. The fee limits took effect Oct. 1 of that year.

Shortly after the Fed set the limits, Visa announced a series of strategies to make its network more appealing to merchants, like reducing certain fees charged to handle debit purchases and fixing other fees that were formerly variable. At the time CEO Joseph Saunders said the actions were aimed at maintaining Visa's lead in the debit card business.

Among the strategies was its "Fixed Acquirer Network," which was put in place in April and is the subject of the Department of Justice probe.

Visa shares ended Friday trading up $2.71, about 2 percent, at $142.71. The stock has changed hands between $88.78 and $146.41 in the past 52 weeks and is up more than 40 percent since the beginning of the year.

[Associated Press; By EILEEN AJ CONNELLY]

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