S.F. _____ Section 1. NEW SECTION . 424A.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Electronic payment transaction” means a transaction 4 in which a person uses a debit card, credit card, or other 5 payment code or device, issued or approved through a payment 6 card network to debit an asset account or use a line of 7 credit, whether authorization is based on signature, personal 8 identification number, or other means. 9 2. “Interchange fee” means any fee established, charged, 10 or received by a payment card network for the purpose of 11 compensating the issuer for its involvement in an electronic 12 payment transaction. 13 3. “Issuer” means any person who issues a debit card or 14 credit card, or the issuer’s agent. 15 4. “Payment card network” means an entity that directly, 16 or through licensed members, processors, or agents, provides 17 the proprietary services, infrastructure, and software that 18 route information and data to conduct debit card or credit 19 card transaction authorization, clearance, and settlement, and 20 that a merchant or seller uses in order to accept as a form of 21 payment a brand of debit card, credit card, or other device 22 that may be used to carry out debit or credit transactions. 23 5. “Settlement” means the transfer of funds from a 24 customer’s account to a seller or merchant upon electronic 25 submission of finalized sales transactions to the payment card 26 network. 27 Sec. 2. NEW SECTION . 424A.2 Interchange fees —— limitation. 28 The amount of any tax or fee imposed by state or local 29 government that is calculated as a percentage of an electronic 30 payment transaction amount and listed separately on the payment 31 invoice or other demand for payment, or the amount of any 32 fuel taxes imposed under chapter 452A, shall be excluded from 33 the amount of an interchange fee charged for that electronic 34 payment transaction. 35 -1- LSB 5515SC (2) 84 rn/sc 1/ 5

S.F. _____ Sec. 3. NEW SECTION . 424A.3 Circumvention prohibited. 1 It shall be unlawful to alter or manipulate the computation 2 and imposition of interchange fees by increasing the rate or 3 amount of fee applicable to or imposed upon that portion of an 4 electronic payment transaction not attributable to a state or 5 local tax or fee to circumvent the effect of section 424A.2. 6 Sec. 4. NEW SECTION . 424A.4 Deduction or rebate —— 7 settlement procedure. 8 A payment card network shall either deduct the amount of 9 any tax or fee imposed as described in section 424A.2 from the 10 calculation of interchange fees specific to each form or type 11 of electronic payment transaction at the time of settlement 12 or shall rebate an amount of interchange fee proportionate 13 to the amount attributable to the tax or fee. The deduction 14 or rebate shall occur at the time of settlement when the 15 merchant or seller is able to capture and transmit tax or fee 16 amounts relevant to the sale at the time of sale as part of the 17 transaction finalization. If the merchant or seller is unable 18 to capture and transmit tax or fee amounts relevant to the sale 19 at the time of sale, the payment card network shall accept 20 proof of tax or fee amounts collected on sales subject to an 21 interchange fee upon the submission of sales data by the seller 22 or merchant and shall promptly credit the merchant or seller’s 23 settlement account. 24 Sec. 5. NEW SECTION . 424A.5 Enforcement —— penalty. 25 1. The provisions of this chapter are subject to the powers 26 and authority of the attorney general or the attorney general’s 27 designee. 28 2. If a court finds in an action brought by the attorney 29 general, or the attorney general’s designee, that a person 30 has intentionally violated a provision of this chapter, the 31 person shall be subject to a civil penalty of not less than 32 one thousand dollars nor more than five thousand dollars for 33 each violation. In addition, a person paying interchange fees 34 imposed in violation of this chapter may bring an action at law 35 -2- LSB 5515SC (2) 84 rn/sc 2/ 5

S.F. _____ to recover actual damages. The court may order such equitable 1 relief as it deems necessary, including temporary and permanent 2 injunctive relief. 3 Sec. 6. NEW SECTION . 424A.6 Nonseverability. 4 In the event that any provision of this chapter or its 5 application is held to be invalid with regard to a federally 6 chartered bank or other financial institution, it shall be 7 held equally invalid with regard to a financial institution 8 licensed by or operating within this state, and to this end the 9 provisions of this chapter are not severable. 10 Sec. 7. NEW SECTION . 537C.1 Interchange fees —— 11 computation. 12 The computation of an interchange fee established, charged, 13 or received by a payment card network for the purpose of 14 compensating the issuer for its involvement in an electronic 15 payment transaction, as those terms are defined in section 16 424A.1, shall be governed by the provisions of chapter 424A. 17 Sec. 8. APPLICABILITY. This Act is applicable to electronic 18 payment transactions processed on or after July 1, 2012. 19 EXPLANATION 20 This bill prohibits the imposition of interchange fees on 21 specified portions of electronic payment transactions. 22 The bill contains several definitions. The bill defines an 23 “electronic payment transaction” to mean a transaction in which 24 a person uses a debit card, credit card, or other payment code 25 or device, issued or approved through a payment card network 26 to debit an asset account or use a line of credit, whether 27 authorization is based on signature, personal identification 28 number, or other means. The bill defines an “interchange fee” 29 to mean any fee established, charged, or received by a payment 30 card network for the purpose of compensating the issuer for 31 its involvement in an electronic payment transaction. The 32 bill defines an “issuer” to mean any person who issues a debit 33 card, credit card, or the issuer’s agent. The bill defines 34 “payment card network” to mean an entity that directly, or 35 -3- LSB 5515SC (2) 84 rn/sc 3/ 5

S.F. _____ through licensed members, processors, or agents, provides 1 the proprietary services, infrastructure, and software that 2 route information and data to conduct debit card or credit 3 card transaction authorization, clearance, and settlement, and 4 that a merchant or seller uses in order to accept as a form of 5 payment a brand of debit card, credit card, or other device 6 that may be used to carry out debit or credit transactions. 7 The bill defines “settlement” to mean the transfer of funds 8 from a customer’s account to a seller or merchant upon 9 electronic submission of finalized sales transactions to the 10 payment card network. 11 The bill provides that the amount of any tax or fee imposed 12 by state or local government that is calculated as a percentage 13 of the payment amount and listed separately on the payment 14 invoice or other demand for payment, or the amount of any 15 state fuel taxes imposed, shall be excluded from the amount 16 of an interchange fee charged for the purpose of completing 17 an electronic payment transaction. The bill provides that it 18 shall be unlawful to alter or manipulate these provisions by 19 increasing the rate or amount of fee applicable to or imposed 20 upon that portion of an electronic payment transaction not 21 attributable to a state or local tax or fee. 22 The bill’s provisions are subject to the powers and 23 authority of the attorney general or the attorney general’s 24 designee. The bill provides for a civil penalty if a person 25 has intentionally violated the bill’s provisions of not 26 less than $1,000 nor more than $5,000 for each violation. 27 Additionally, the bill provides that a person paying 28 interchange fees imposed in violation of this chapter may 29 bring an action at law to recover actual damages, and that the 30 court may order such equitable relief as it deems necessary, 31 including temporary and permanent injunctive relief. 32 The bill specifies procedures for exclusion of taxes or fees 33 from the computation of interchange fees. The bill provides 34 that a payment card network shall either deduct the amount 35 -4- LSB 5515SC (2) 84 rn/sc 4/ 5

S.F. _____ of any tax or fee from the calculation of interchange fees 1 specific to each form or type of electronic payment transaction 2 at the time of settlement, or rebate an amount of interchange 3 fee proportionate to the amount attributable to the tax or fee. 4 The bill provides that the deduction or rebate shall occur at 5 the time of settlement when the merchant or seller is able to 6 capture and transmit tax or fee amounts relevant to the sale 7 at the time of sale as part of the transaction finalization. 8 In the event that the merchant or seller is unable to capture 9 and transmit tax or fee amounts relevant to the sale at the 10 time of sale, such as when the tax or fee is collected at the 11 wholesale level or when a credit or debit card terminal is 12 incapable of capturing and transmitting tax or fee amounts, 13 the bill provides that the payment card network shall accept 14 proof of tax or fee amounts collected on sales subject to 15 an interchange fee upon the submission of sales data by the 16 seller or merchant and promptly credit the merchant or seller’s 17 settlement account. 18 The bill provides that in the event that any provision 19 contained in the bill or its application is held to be invalid 20 with regard to a federally chartered bank or other financial 21 institution, it shall be held equally invalid with regard to a 22 financial institution licensed by or operating within Iowa. 23 The bill includes a provision in Title XIII of the Code, 24 governing commerce, indicating that the computation of an 25 interchange fee established, charged, or received by a payment 26 card network for the purpose of compensating the issuer for 27 its involvement in an electronic payment transaction shall be 28 governed by the provisions of Code chapter 424A, as created in 29 the bill. 30 The bill is applicable to electronic payment transactions 31 processed on or after July 1, 2012. 32 -5- LSB 5515SC (2) 84 rn/sc 5/ 5