The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Rules
BILL: CS/CS/CS/SB 564
INTRODUCER: Rules Committee; Commerce and Tourism Committee; Banking and Insurance
Committee; and Senator Hutson
SUBJECT: Interchange Fees on Taxes
DATE: April 25, 2023 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Moody Knudson BI Fav/CS
2. Renner McKay CM Fav/CS
3. Moody Twogood RC Fav/CS
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/CS/CS/SB 564 creates, effective October 1, 2024, s. 501.0119, F.S., which prohibits an
issuer, a payment card network, an acquirer bank, or a processor from charging an interchange
fee on any tax that is separately itemized on a sales invoice, sales slip, or other evidence of sale
in any electronic payment transaction if the merchant informs a specified entity of such tax
amount as part of the authorization or settlement process for such transaction. The merchant
must transmit the tax amount data as part of the authorization or settlement process to avoid
being charged interchange fees on the tax amount. Section 501.0119, F.S., does not create
liability for a payment card network regarding the accuracy of the tax data reported by the
merchant.
A merchant that does not transmit the tax amount data for eligible electronic payment
transactions as part of the authorization or settlement process may submit tax documentation to
the specified entity no later than 180 days after the date of the electronic payment transaction,
and within 30 days, the issuer must credit to the merchant the amount of interchange fees
charged on the tax amount of the electronic payment transaction.
An issuer, a payment card network, an acquirer bank, a processor, or other designated entity that
has received the tax amount data and that violates these provisions is subject to a civil penalty of
$1,000 per electronic payment transaction, and the issuer must refund the interchange fees
charged on any tax amount relative to the electronic payment transaction.
BILL: CS/CS/CS/SB 564 Page 2
An entity, other than the merchant, involved in the facilitation or processing of an electronic
payment transaction may not distribute, exchange, transfer, disseminate, or use the data except to
facilitate the transaction or as required by law. A violation of this provision constitutes a
violation of the Florida Deceptive and Unfair Trade Practices Act (FDUPTA) which may be
enforced only by the enforcing authority and subjects the violator to sanctions and penalties
provided under the FDUPTA provisions. If such action is successful, the enforcing authority is
entitled to reasonable attorney fees and costs.
The bill defines several terms, including acquirer bank, authorization, clearance, credit card,
debit card, electronic payment transaction, interchange fee, issuer, merchant, payment card
network, processor, settlement, tax, and tax document.
The bill requires the Office of Economic and Demographic Research (EDR) to submit a report to
the President of the Senate and the speaker of the House of Representatives by January 9, 2024,
containing certain findings, policy options and impacts. EDR is authorized to contract with
specified types of entities that meet certain criteria for the sole purpose of developing some or all
of the underlying analysis and findings to be included in the reports.
See Section V. Fiscal Impact Statement.
The bill, except as otherwise provided, is effective upon becoming law.
II. Present Situation:
Financial Institutions Code
The Florida Office of Financial Regulation (OFR) is responsible for all activities of the Financial
Services Commission relating to the regulation of banks, credit unions, other financial
institutions, finance companies, and the securities industry.1
Florida law defines the term “financial institution” as a state or federal savings or thrift
association, bank, savings bank, trust company, international bank agency, international banking
corporation, international branch, international representative office, international administrative
office, international trust entity, international trust company representative office, qualified
limited service affiliate, credit union, or an agreement corporation operating pursuant to s. 25 of
the Federal Reserve Act, 12 U.S.C. s. 601 et seq., or Edge Act corporation organized pursuant to
s. 25(a) of the Federal Reserve Act, 12 U.S.C. ss. 611 et seq.2
Financial institutions may be either state or federally chartered. OFR’s Division of Financial
Institutions provides general supervision over all state financial institutions, their subsidiaries,
and service corporations,3 and is charged with the administration of the financial institutions
codes, which apply to all state-authorized or state-chartered financial institutions and to the
enforcement of all laws relating to state-authorized or state-chartered financial institutions.
1
Section 20.121(3)(a)2., F.S.
2
Section 655.005(1)(i), F.S.
3
Section 655.012(1), F.S.
BILL: CS/CS/CS/SB 564 Page 3
As of June 30, 2020, the Division of Financial Institutions regulates 197 financial institutions:4
 69 banks
 66 credit unions
 21 international bank offices
 15 trust companies
 16 family trust companies
 10 qualified limited service affiliates
Payment card networks or card associations, such as Visa and MasterCard, and processors do not
meet the definition of financial institution and, therefore, are not currently regulated by the
OFR.5
Electronic Payment Transactions
In 1958, Bank of America launched the first credit card6 payment program with revolving credit
known as BankAmericard in the U.S.7 In 1966, the Bank of Delaware launched the first debit
card8 pilot program.9 Over time credit card and debit cards have become a common way to pay
for goods and services. Several key players are involved in processing credit card and debit card
transactions, including acquiring banks or contracted processors,10 payment card networks or
bank card associations,11 and issuers or issuing banks.12 Processing credit card or debit card
transactions requires several steps, including gathering sales information from the merchant,
4
The OFR, Fast Facts (2021 ed.), available at: https://flofr.gov/sitePages/documents/FastFacts.pdf (last visited April 3,
2023).
5
The OFR, Agency Analysis for SB 564 (2023), p. 2, Mar. 14, 2023 (on file with the Senate Committee on Banking and
Insurance).
6
15 U.S.C. s. 1602(l) defines “credit card” as any card, plate, coupon book or other credit device existing for the purpose of
obtaining money, property, labor, or services on credit.
7
Visa, Inc., What We Do, available at: What we do | Unlocking opportunities for everyone | Visa (last visited April 3, 2023).
8
15 U.S.C. s. 1693o-2.(c)(2) defines “debit card” as (A) any card, or other payment code or device, issued or approved for
use through a payment card network to debit an asset account (regardless of the purpose for which the account is established),
whether authorization is based on signature, PIN, or other means; (B) includes a general-use prepaid card, as that term is
defined in s. 15 U.S.C. s. 1693l-1(a)(2)(A); and (C) does not include paper checks.
9
Hyashi, F., Sullivan, R., & Weiner, S., A Guide to the ATM and Debit Card Industry, Federal Reserve Bank of Kansas City,
2003, pg. 13, available at: A Guide to the ATM and Debit Card Industry (kansascityfed.org) (last visited April 3, 2023).
10
An “acquiring bank,” also known as the merchant bank, is a member of a card association that contracts with merchants for
the settlement of card transactions. An acquiring bank must sponsor a merchant that accepts as a form of payment card
association brand payment cards, and may contract directly with merchants or indirectly through agent banks or other third-
party organizations to process card transactions. Office of the Comptroller of the Currency, Comptroller’s Handbook: Safety
and Soundness: Merchant Processing, Vol. 1, pg. 2, Aug. 2014, available at: OCC Merchant Processing Handbook
(hereinafter cited as “OCC Merchant Processing Handbook”) (last visited April 3, 2023).
11
“Payment card network” or “bank card associations” are entities that directly, or through licensed members, processors, or
agents, provides the proprietary services, infrastructure, and software that route information and data to conduct debit card or
credit card transaction authorization, clearance, and settlement, and that a person uses in order to accept as a form of payment
a brand of debit card, credit card or other device that may be used to carry out debit or credit transactions. 15 U.S.C. s.
1693o-2.(c)(11). Examples of the major payment card networks include Visa, Inc. (Visa), MasterCard, Inc. (MasterCard),
Discover Global Network (Discover), and American Express (AmEx). See Visa, What We Do, available at: What we do |
Unlocking opportunities for everyone | Visa (last visited April 3, 2023); MasterCard, Who We Are, available at: About
Mastercard | Who We Are | Who We Serve (last visited April 3, 2012); Discover, Our Network, available at: Our Unique
Payments Network | Discover Global Network (last visited April 3, 2023); AmEx, American Express Network: The Network
That Backs You, available at; GNW-Home (americanexpress.com) (last visited April 3, 2023).
12
“Issuer” or “issuing bank” is any person or entity who issues a debit card, or credit card, or the agent of such person with
respect to such card. 15 U.S.C. s. 1693o-2.(c)(9).
BILL: CS/CS/CS/SB 564 Page 4
obtaining authorization for the transaction, collecting funds from the issuing bank, and making
payment to the merchant.13
Network Infrastructure, Technology, and Security
In 2006, certain major payment card networks established the PCI Security Standards Council
(PCI SSC) which created standards that set out technical requirements for their respective
compliance programs for payments made worldwide.14 Participating organizations include
merchants, processors, developers, and point of sale vendors.15 There are 12 requirements for
securing cardholder data that is stored, processed or transmitted by participating members, such
as encrypting transmission of cardholder data across open public networks, and developing and
maintaining secure systems and applications.16 Payment card networks or processors are
responsible for enforcement of such requirements.17
Authorization Process
These secured networks are used to process the authorization of credit card and debit card
transactions. Authorization is the process of approving or declining a transaction prior to the
transaction being finalized.18 A merchant may obtain an estimated/initial authorization to place a
hold for a transaction amount for transactions in certain types of industries when the actual
amount of a transaction is unknown.19 Typically, authorization for a transaction to be paid by
credit card or debit card is requested electronically for the transaction amount from a merchant’s
point of sale system through the merchant’s bank or processor (via the payment card network) to
the issuer in a matter of seconds.20 An illustration of the authorization process is shown below.21
13
OCC Merchant Processing Handbook at pg. 1.
14
PCI SSC, About Us, available at: Official PCI Security Standards Council Site - Verify PCI Compliance, Download Data
Security and Credit Card Security Standards (hereinafter cited as “PSI SSC Governance Website”) (last visited April 3,
2023).
15
PCI SSC, The Prioritized Approach to Pursue PCI DSS Compliance, pg. 2, available at: PCI DSS Prioritized Approach for
PCI DSS 3.2 (pcisecuritystandards.org) (last visited April 3, 2023).
16
Id. at pgs. 1, 8-9.
17
PSI SSC Governance Website.
18
OCC Merchant Processing Handbook at pg. 7.
19
See, Visa, Authorization and Reversal Processing Requirements for Merchants, available at: Authorization and Reversal
Processing Requirements for Merchants (visa.com) (last visited April 3, 2023).
20
OCC Merchant Processing Handbook at pg. 8.
21
Id.
BILL: CS/CS/CS/SB 564 Page 5
Clearing and Settlement Process
Clearing is the process of transmitting final transaction data from merchants to issuers for
posting to the cardholder’s account, and the calculation of certain fees and charges that apply to
the issuer and acquirer.22 The settlement process includes transmitting sales information to the
issuing bank for collection and reimbursement of funds to the merchant, and the process of
calculating and reporting the net financial position of issuers and acquirers for all transactions
that are cleared.23 An illustration of the clearing and settlement process is shown below.24
22
OCC Merchant Processing Handbook at pg. 9.
23
Id.
24
Id.
BILL: CS/CS/CS/SB 564 Page 6
Transaction Fees
Merchants are charged network fees,25 processor fees,26 and interchange fees for using network
infrastructure and technology, and accepting credit card and debit cards as a form of payment for
transactions. An “interchange transaction fee” is any fee established, charged or received by a
payment card network for the purpose of compensating an issuer for its involvement in an
electronic payment transaction.27 Payment card networks base the fees on the type or tier of the
merchant, and interchange fees includes a flat rate plus a percentage of the transaction value.28
25
15 U.S.C. s. 1693o-2.(c)(10) defines “network fee” as a fee charged and received by a payment card network with respect
to an electronic debit transaction, other than an interchange transaction fee. These fees may also be referred to as “assessment
fees.” See Leonard, K., & Bottorff, C., Credit Card Processing Fees (2023 Guide), Forbes Advisor, Aug. 19, 2022, available
at: Credit Card Processing Fees (2023 Guide) – Forbes Advisor (hereinafter cited as “Forbes Article”) (last visited April 3,
2023). 15 U.S.C. s. 1693o-2.(c)(5) defines “electronic debit transaction” as a transaction in which a person uses a debit card.
26
Forbes Article (noting that payment process fees may include monthly fees, per-transaction fees, equipment lease fees and
statement fees).
27
See 15 U.S.C. s. 1693o-2.(c)(8).
28
See Visa, The Visa System: Rates, Fees and Rules, available at: Visa USA Interchange Reimbursement Fees (last visited
April 3, 2023); MasterCard, MasterCard Interchange Rates and Fees, available at: U.S. Region Interchange, 22 April 2022
(mastercard.us) (last visited April 3, 2023); O’Keefe, C., Discover Interchange Rates (2023), Merchant Cost Consulting, Jan.
8, 2023, available at: Discover Interchange Rates (2023) | Merchant Cost Consulting (last visited April 3, 2023); Rej, M.,
Amex Interchange Rates and Processing Fees, Merchant Cost Consulting, Sept. 16, 2022, available at: Amex Interchange
Rates and Processing Fees (2023) | Merchant Cost Consulting (last visited April 3, 2023).
BILL: CS/CS/CS/SB 564 Page 7
Credit Card Transactions
No federal or state regulations were identified that restrict the maximum amount of interchange
fees that may be charged to a merchant for credit card transactions. The average interchange fees
for credit card transactions with major payment card networks is as follows:
 Visa: 1.4% to 2.5%
 MasterCard: 1.5% to 2.6%
 Discover: 1.55% to 2.5%
 AmEx: 2.3% to 3.5%29
Debit Card Transactions
The Electronic Fund Transfer Act (EFTA)30 was established with a primary objective of
individual consumer’s rights regarding the electronic fund and remittance transfer systems.31 The
EFTA provides that an amount of any interchange transaction fee that an issuer32 may receive or
charge with respect to an electronic debit transaction must be “reasonable and proportional to the
cost incurred by the issuer” with respect to the transaction.33 The EFTA provides for certain
exemptions from these provisions, such as exemptions for small issuers, including issuers34 that
have less than $10 billion in assets,35 and exemptions for government-administered payment
programs and reloadable prepaid cards.36
The Board of Governors of the Federal Reserve System (Board) may regulate any interchange
transaction fee that