cost of authorizing, clearing, and settling a debit card transaction reported by issuers that responded to our survey and provided that information. under the second alternative, an issuer would comply with the interchange fee standard as long as it does not receive an interchange fee above the cap. the proposed rule provides the same initial cap of 12 cents per transaction. the statute requires the board to collect data from card issuers or payment card networks as necessary to carry out the provisions of the statute ( and to publish aggregate data on a biannual basis ). the board expects that it would adjust the cap or safe harbor amounts in the future, if warranted by future data collections. fraud - prevention adjustment. the statute permits, but does not require, the board to allow for an adjustment to an interchange fee to account for an issuer ’ s costs in preventing fraud, provided the issuer complies with standards established by the board relating to fraudprevention activities. 12 the statute excludes fraud losses as a category of costs that may be recovered through the fraud - prevention adjustment. the proposed rule does not currently include a specific adjustment to the amount of interchange fees for an issuer ’ s fraudprevention costs because at the time the proposed rule was issued, the board had insufficient information upon which to propose a specific adjustment and the standards an we believe that both alternatives provide better economic incentives for covered issuers to improve the efficiency of their card operations than would be provided by an approach based solely on each issuer's allowable costs. the safe harbor in the first alternative and the cap in the second alternative are also intended to reduce the administrative compliance burden on industry participants and would improve the consistency and ease of enforcement by supervisors. efta § 920 ( a ) ( 5 ), 12 usc § 1693o - 2 ( a ) ( 5 ). bis central bankers ’ speeches issuer must meet to qualify to receive it. instead, the board requested comment on two general approaches and posed a number of questions related to those alternatives. under the first approach, the fraud adjustment would allow issuers to recover costs incurred for implementing major innovations that would likely result in substantial reductions in total, industry - wide fraud losses. under the second approach, the fraud adjustment would reimburse the issuer for reasonably necessary steps it takes to maintain an effective fraudprevention program. the second approach would not prescribe specific technologies that must be employed as part of the program. after

interchange fee that an issuer this approach would provide routing choice to merchants that only accept signature debit. about 6 million of the 8 million merchant locations in the united states that accept debit cards do not have pin debit capability and only have the capability to accept signature debit transactions. in addition, there are currently operational or market impediments to using pin debit for certain types of transactions, such as most online transactions. this approach would require issuers to have multiple signature debit networks, such as visa and mastercard, on their cards ( unless a card had only pin functionality ). the signature debit network over which a transaction is routed is determined by the first digit of the card number ; therefore, the industry currently does not have the capability to enable transactions using a particular debit card to be routed over either of two signature networks. bis central bankers ’ speeches receives for a debit card transaction to an amount that is “ reasonable and proportional to the cost incurred by the issuer with respect to the transaction. ” 6 the board is required by law to establish standards for assessing whether an interchange fee meets the reasonable - andproportional requirement ; the statute directs the board to adopt these standards by april 21. in developing these standards, the statute explicitly requires the board to consider certain factors and not to consider other factors. in particular, the statute instructs the board to consider the functional similarity between debit card transactions and checks, which clear at par ( i. e., with no interchange fees ). 7 the statute also directs the board to distinguish between the issuer ’ s incremental cost to authorize, clear, and settle a particular transaction, which the board must consider, and other costs that are not specific to a particular electronic debit transaction, which the board may not consider. 8 these are the directives that congress provided in the law. the statute exempts certain issuers and cards from the restrictions on interchange fees. in particular, the law states that the interchange fee standards do not apply to issuers that, together with affiliates, have assets of less than $ 10 billion. 9 in addition, the law states that the standards do not apply to debit cards used in government - administered payment programs and certain reloadable, general - use prepaid cards. 10 as stated above, the statute requires the board to consider “ the incremental cost incurred by an issuer for the role of the issuer in the authorization,