Commissary Credit and Debit Card User Fee, 71819-71822 [2019-28018]

Agencies

• DEPARTMENT OF DEFENSE
• Office of the Secretary

[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Rules and Regulations]
[Pages 71819-71822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28018]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 225

[Docket ID: DOD-2019-OS-0131]
RIN 0790-AK92


Commissary Credit and Debit Card User Fee

AGENCY: Department of Defense (DoD).

ACTION: Interim final rule.

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SUMMARY: This rule implements Section 621 of the John S. McCain 
National Defense Authorization Act for Fiscal Year 2019 expanding 
patronage for commissary, exchange, and revenue-generating morale, 
welfare, and recreation (MWR) facilities. As part of DOD's 
implementation the Department is required to collect a user fee when 
these new populations utilize a credit or debit card that creates a 
cost to the Department of the Treasury for processing these 
transactions. As it related to this Section, such costs are only 
generated by credit or debit card transactions at Defense Commissary 
Agency (DeCA) facilities.

DATES: Effective date: This interim final rule is effective on December 
30, 2019.
    Comment date: Comments will be received by February 28, 2020.
    Applicability date: Per the deadline in the statute and as 
implemented in this rule, these user fees go into effect on January 1, 
2020.

ADDRESSES: You may submit comments, identified by docket number and or 
Regulatory Information Number (RIN) and title, by any of the following 
methods:
     Federal Rulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Department of Defense, Office of the Chief 
Management Officer, Directorate for Oversight and Compliance, 4800 Mark 
Center Drive, Mailbox #24, Suite 08D09, Alexandria, VA 22350-1700.
    Instructions: All submissions received must include the agency name 
and docket number or RIN. The general policy for comments and other 
submissions from members of the public is to make these submissions 
available at https://www.regulations.gov as they are received without 
change, including any personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: Jane Westbay, (571) 372-6579, 
[email protected].

SUPPLEMENTARY INFORMATION:

Summary of New and Amendatory Regulatory Provisions and Their Impact

    This rule implements Section 621 of the John S. McCain National 
Defense Authorization Act for Fiscal Year 2019 (Purple Heart and 
Disabled Veterans Equal Access Act of 2018), codified at Section 1065 
of Title 10, United States Code. Section 621 expands patronage for 
commissary, exchange, and revenue-generating morale, welfare, and 
recreation (MWR) facilities. By January 1, 2020, the Department of 
Defense is directed to:

[[Page 71820]]

     Extend commissary and MWR facility privileges, including 
exchange, military MWR recreation lodging, and other revenue-generating 
MWR facilities, on the same basis as a member of the armed forces 
entitled to retired or retainer pay. Section 621 applies to veterans 
who
     were awarded the Purple Heart.
     are Medal of Honor recipients.
     are former prisoners of war.
     have a Department of Veterans Affairs-documented service-
connected disability rating.
     Impose a user fee on individuals who are eligible solely 
under the statute to cover any increase in expenses borne by the 
Department of Treasury (Treasury) on behalf of commissary stores for 
processing credit or debit cards for payment.
     Deposit commissary credit/debit card user fees collected 
in the General Fund of the Treasury.
     Provide briefing to the Committees on Armed Services of 
the Senate and House of Representatives on the plan to implement 
Section 1065 of Title 10, no later than October 1, 2019.
    Section 621 also applies to caregivers and family caregivers for 
veterans as defined in Section 1720G of Title 38, U.S.C.

Background and Legal Basis for This Rule

    This rule implements a patronage expansion pursuant to 10 U.S.C. 
1065 as modified by Section 621 of the John S. McCain National Defense 
Authorization Act for Fiscal Year 2019. This Section's provisions apply 
when using a credit or debit card to pay for commissary purchases. As 
card network rules place limitations on the user fees that can be set 
for credit cards and debit cards, the Department has elected to set 
user fees as a flat rate at or below the current average cost to the 
Treasury to process credit cards and debit cards. Initially, and in 
consultation with the card processing operations of the Treasury, the 
initial rate established by the Department will be 1.9 percent of an 
individual's total sales amount for the use of a credit card, and 0.5 
percent of an individual's total sales amount for the use of a debit 
card. On a periodic basis, the Department plans to review with Treasury 
actual costs incurred by the Treasury on credit card and debit card use 
by individuals who are eligible solely under the statute and adjust 
corresponding user fees as necessary. User fees will not be imposed on 
the use of electronic benefit transfer (EBT) cards like the 
Supplemental Nutrition Assistance Program or the Women, Infant, and 
Children as the rate for processing these cards is negligible (0.01 
percent) and does not merit imposition of a user fee under the 
requirements of this legislation. This user fee will also not apply to 
cash, personal check, or MILITARY STAR card transactions as these forms 
of payment do not contribute to the expenses of the Treasury for 
processing card transactions.
    In addition to this rule, a corresponding internal policy, 
``Expansion of Patronage for Certain Veterans and Certain Caregivers 
for Veterans,'' will be available at: https://www.esd.whs.mil/DD/.

Expected Impact of the Interim Rule

    As part of the implementation plan for program expansion, DoD 
performed an impact assessment to identify potential high volume 
locations based on veteran density and general cost of living. As part 
of the Department's assessment, DoD gathered veteran data from VA 
National Center for Veterans Analysis, the VA Office of the Actuary, 
the DoD Office of the Actuary, U.S. Census Bureau, Defense Manpower 
Data Center, Defense Commissary Agency, and Military Service exchanges. 
The Department found a higher impact at locations with a high veterans 
density (e.g., San Antonio, Tampa, San Diego) as well as a higher 
impact at locations with a high cost of living (e.g., Hawaii, Alaska, 
Puerto Rico, Guam, San Francisco Bay Area, New York City). As such, 
these locations are informed and preparing for the new volume of usage.
    The Department found many conditions impact patronage including the 
following factors.
     Time, distance, and effort to access installations.
     Time and distance from VA medical facilities (farther = 
less likely to obtain a Veteran Health Identification Card that would 
facilitate installation and shopping access).
     Personal mobility/transportation.
     Personal financial circumstances.
     Local economic conditions.
     Off-installation and online shopping competition.
     Established shopping habits and brand loyalty.
     Eligibility of the primary shopper for the household.
    Based on DoD's current user patronage, the proximity of these new 
users to military installations, and established shopping patterns, the 
Department expects only 30 percent of the 4.1 million newly eligible 
users (1.23 million actual users = 4.1 million x 30%) to shop at DoD 
commissary stores.
    In line with supermarket industry statistics available at https://www.creditcards.com/credit-card-news/payment-method-statistics-1276.php, the Department expects 85 percent of these new shoppers 
(1,045,500 shoppers = 1.23 million x 85%) to pay for their purchases 
with credit or debit cards, causing an increase in processing costs to 
the Treasury. Of the 1.23 million expected users, 23 percent are 
expected to pay with credit cards (282,900 credit card users = 1.23 
million x 23%) and 62 percent are expected to pay with debit cards 
(762,600 debit card users = 1.23 million x 62%). Card network rules 
prevent charging fees in amounts greater than the average cost to 
process transactions, so the Department, in conjunction with the 
Treasury, analyzed current processing costs for commissary credit and 
debit card transactions to determine the initial fees (see Table 1--
DECA Payment Card Processing Summary). Rather than charging a different 
rate for every brand of credit or debit card used, the Department, in 
conjunction with the Treasury, opted to set one rate for credit and 
signature debit cards (which are processed like credit cards) and a 
different fee for personal identification number (PIN) debit cards. If 
the Department had opted to charge only one fee, then the lowest 
average card rate that could be used would have been the rate for PIN 
debit cards (0.51 percent), which would not have recovered a 
significant portion of the Treasury's processing costs. The credit card 
fee was set at the lowest average rate of all of the credit card brands 
(1.9 percent), and the debit card fee was set just below the average 
debit card rate (0.5 percent). On an average basket of groceries from 
the commissary ($66), credit card users would pay $1.25 ($66 x 1.9%) 
and debit card users would pay $0.33 ($66 x 0.5%). If each new user 
shopped four times per month, credit card users would pay approximately 
$60 annually in fees ($1.25 x 4 x 12) and debit card users would pay 
approximately $15.84 annually in fees ($0.33 x 4 x 12). Total amounts 
collected for the credit and debit card user fee would be $29,053,584 
(($60 x 282,900) + ($15.84 x 762,600)).
    Even with this user fee, these newly-eligible commissary shoppers 
will enjoy an average overall grocery basket savings of over 20 percent 
compared to commercial grocery stores. Commissary stores are required 
to deliver an average worldwide savings of 23.7 percent over commercial 
grocery stores, so imposing a 0.5 to 1.9 percent user fee on commercial 
debit and credit card

[[Page 71821]]

purchases still nets a 23.2 to 22.8 percent overall savings to the 
consumer.
    The Department of the Treasury, Bureau of the Fiscal Service 
administers the Card Acquiring Service (CAS) and evaluated DeCA's 
FY2018 payment card usage (the most recent annual period at the time of 
the request) as the best available proxy for projecting card processing 
costs that would be incurred by the Treasury for the new patron groups. 
The following data elements for DeCA FY2018 were captured: Transaction 
count and sales volumes by all card types (i.e., credit, debit, EBT/
WIC); volume breakout by card brand/network within credit volumes 
(i.e., American Express, Discover, MasterCard, and Visa); and average 
per card type/network, sales per transaction (`ticket value''), cost 
per transaction, and cost per $1 in sales. These data elements for 
DeCA's FY2018 payment card activity are disclosed in the table below. 
For each card type/network, the data was used to calculate an 
``effective rate,'' which approximates the related processing costs 
borne by the Treasury.

                                                  Table 1--DECA Payment Card Processing Summary FY2018
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                                                                          % of net sales                   Avg . ticket    Avg. cost per   Avg. cost per
                    Card type/network                     % of net sales      amount      Effective rate       value           tran           dollar
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EBT.....................................................            0.96            1.25            0.01             $85           $0.01         $0.0001
PIN.....................................................           56.09           55.15            0.51              65            0.33          0.0051
Amex....................................................            4.63            4.90            1.90              70            1.44          0.0207
Discover................................................            1.30            1.51            2.40              76            1.82          0.0240
Visa....................................................           31.97           31.74            1.91              65            1.24          0.0191
MasterCard..............................................            5.05            5.46            1.93              71            1.37          0.0193
                                                         -----------------------------------------------------------------------------------------------
                                                                     100             100            1.13              66            0.74          0.0113
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Waiver of Proposed Rulemaking

    DoD is issuing this rulemaking as an interim final rule and has 
determined that, under the Administrative Procedure Act (APA), 5 U.S.C. 
553(b)(B), it would be impracticable, unnecessary, and contrary to the 
public interest to delay a final regulation until a public notice and 
comment process has been completed.
    The conclusion of a public notice and comment period before the 
rule is finalized would be impracticable because it would impede due 
and timely execution of DoD's function to provide patronage to these 
new groups. Since the NDAA was signed August 13, 2018, DOD and the 
Department of Treasury have worked in coordination on a number of 
actions necessary to implement the law. Before DoD could begin any 
rulemaking implementation, an impact assessment requiring data from VA, 
Commerce, and other agencies as well on ongoing discussions with the 
Department of the Treasury needed to be completed. This has left DoD 
with insufficient time to prepare and complete a full public notice and 
comment rulemaking proceeding and to timely complete a final rule 
before the statutory start date of January 1, 2020.
    To the extent that an NPRM would furnish general public information 
for the intended new audiences, it is unnecessary in light of the 
extensive outreach already undertaken by DoD, which provided more 
specific and more detailed notice to these affected beneficiaries than 
an NPRM would provide. Outreach included identifying the eligible 
population; joint efforts with Departments of Veterans Affairs, 
Homeland Security (Coast Guard) and the Treasury; to communicate with 
potential new patrons about eligibility, access, and authorized 
facilities; and development of outreach content to include handouts, 
news releases, fact sheets, and blog and social media content.
    In addition, it is unnecessary as it is a lost opportunity to 
expand patronage by the effective date of January 1, 2020. Missing this 
date would result in confusion to the affected population. Not 
collecting the fee from January 1st would lead to a shortage in 
reimbursement to the Treasury for the additional expense incurred for 
processing credit and debit card transactions made by these new users. 
DoD is required to collect this fee specifically to reimburse the 
Treasury for the additional expenses incurred for processing credit and 
debit cards used by this population. The Department has no way to 
collect the fee retroactively. If the Department does not begin 
collecting the fee on January 1, new patrons could only pay for their 
commissary purchases by cash, check, electronic benefit transfer (EBT) 
card, MILITARY STAR card, or other form of payment that does not cause 
a cost to the Treasury. This would be difficult for DoD to enforce as 
supermarket shopper behavior statistics available at https://www.creditcards.com/credit-card-news/payment-method-statistics-1276.php 
reveal that 85 percent of shoppers pay for grocery purchases with 
credit and debit cards. Imposing a cash or check-only policy for these 
new patron groups would create an unrealistic and unfair condition for 
these shoppers. This outcome would be contrary to the public interest.
    For these reasons, DoD has determined that the public notice and 
participation that the APA ordinarily requires would, in this case, be 
impracticable, unnecessary, and contrary to the public interest and 
that good cause exists for waiving proposed rulemaking and delaying its 
solicitation of comments from the public until after it issues an 
interim final rule. DoD will consider those comments received upon its 
interim final rulemaking in a subsequent final rule.

Executive Order 12866, ``Regulatory Planning and Review'' and Executive 
Order 13563, ``Improving Regulation and Regulatory Review''

    Executive Orders 13556 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule is not a significant regulatory action under 
section 3(f) of Executive Order 12866.

Executive Order 13771, ``Reducing Regulation and Controlling Regulatory 
Costs''

    This rule is not expected to be an E.O. 13771 action, because it is 
not significant under E.O. 12866.

[[Page 71822]]

Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)

    The Department of Defense certifies that this interim final rule is 
not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it 
would not, if promulgated, have a significant economic impact on a 
substantial number of small entities. Therefore, the Regulatory 
Flexibility Act, as amended, does not require us to prepare a 
regulatory flexibility analysis.

Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to each House of the Congress and to the Comptroller 
General of the United States. DoD will submit a report containing this 
rule and other required information to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States. 
This interim final rule is not a ``major rule'' as defined by 5 U.S.C. 
804(2).

Sec. 202, Public Law 104-4, ``Unfunded Mandates Reform Act''

    This interim final rule will not mandate any requirements for 
State, local, or tribal governments, nor will affect private sector 
costs.

Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)

    It has been determined that 32 CFR part 225 does not impose 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act of 1995.

Executive Order 13132, ``Federalism''

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This interim final rule will not have a substantial 
effect on State and local governments.

List of Subjects in 32 CFR Part 225

    Commissary, Credit, Debit, User fee.

0
Accordingly 32 CFR Part 225 is added to read as follows:

PART 225--Commissary Credit and Debit Card User Fee

Sec.
225.1 Purpose.
225.2 Applicability.
225.3 Definitions.
225.4 Policy.
225.5 Responsibilities.
225.6 Procedures.

    Authority: 10 U.S.C. 1065


Sec.  225.1  Purpose.

    This part establishes policy, assigns responsibilities, and 
provides procedures for the implementation of patronage expansion 
pursuant to 10 U.S.C. 1065.


Sec.  225.2  Applicability.

    This part applies to veterans who are Purple Heart recipients, 
veterans who are former prisoners of war, veterans who have a 
Department of Veterans Affairs-documented service-connected disability 
rating between 0-90 percent, and individuals approved and designated as 
the caregiver or family caregiver of an eligible veteran under a 
formalized Department of Veterans Affairs caregiver program (as of 
January 1, 2020, authorized caregivers are the primary family caregiver 
of an eligible veteran under the Program of Comprehensive Assistance 
for Family Caregivers).


Sec.  225.3  Definitions.

    Unless otherwise noted, these terms and their definitions are for 
the purpose of this part.
    Caregiver. Defined in 38 U.S.C. 1720G(d)
    Family Caregiver. Defined in 38 U.S.C. 1720G(d)
    Former POW. Defined in 38 U.S.C. 101
    Service-connected. Defined in 38 U.S.C. 101
    Veteran. Defined in 38 U.S.C. 101


Sec.  225.4  Policy.

    In accordance with 10 U.S.C. 1065, the following new patron groups 
are authorized access to DoD commissary, exchange, and morale, welfare, 
and recreation (MWR) revenue generating activities on the same basis as 
a member of the Military Services entitled to retired or retainer pay, 
effective January 1, 2020:
    (a) Veterans who were awarded the Purple Heart.
    (b) Veterans who are former prisoners of war (POWs).
    (c) Veterans classified by the Department of Veterans Affairs (VA) 
as having a service-connected disability rating below 100 percent.
    (d) Caregivers or family caregivers for veterans under the VA 
caregiver program. These caregivers are only eligible for these 
privileges during their period of active enrollment as the caregiver or 
family caregiver for a veteran.


Sec.  225.5  Responsibilities.

    DIRECTOR, DeCA. Under the authority, direction, and control of the 
Under Secretary of Defense for Personnel and Readiness through the 
Assistant Secretary of Defense for Manpower and Reserve Affairs, the 
Director, DeCA:
    (a) Establishes processes and updates systems necessary to collect 
and deposit with U.S. Treasury, user fees related to commercial debit/
credit card use in commissaries in accordance with section 225.6 of 
this part.
    (b) Implements commissary credit/debit card user fee requirements.


Sec.  225.6  Procedures.

    (a) Commissary Credit/Debit Card User Fee. (1) Only patrons of 
groups newly authorized privileges by this part must pay a user fee 
when using a credit or debit card to pay for commissary purchases to 
offset additional costs charged to the U.S. Treasury associated with 
credit or debit card use.
    (2) The user fee will be set as a transaction-based flat rate, 
calculated within a range of the average annual rates of credit and 
debit card transaction costs incurred by the Department of Treasury on 
behalf of DeCA and in compliance with applicable card network rules. 
One rate will be set for credit and signature debit card transactions, 
which are processed as credit cards. Another rate will be set for 
personal identification number debit card transactions. These rates 
will be reviewed annually and adjustments may be made as necessary to 
meet the requirements of 10 U.S.C. 1065.
    (3) Purchases made with electronic benefit transfer cards (e.g., 
Women, Infants, and Children or Supplemental Nutrition Assistance 
Program) and the MILITARY STAR card are not subject to this credit/
debit card user fee.
    (4) No user fee reimbursement will be made on customer return of 
merchandise.
    (5) All credit/debit card user fee amounts collected in commissary 
stores will be deposited in the General Fund of the Treasury.
    (b) [Reserved]

    Dated: December 20, 2019.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2019-28018 Filed 12-27-19; 8:45 am]
BILLING CODE 5001-06-P