Fed Issues Final Interchange Rule on Fraud Pricing

July 30, 2012 | Posted in News

WASHINGTON — The Federal Reserve Board approved a final rule on debit card interchange fees to make an adjustment for fraud-prevention costs.

The amendment to the rule, which was released by the central bank on Friday, will allow an issuer to receive or charge an amount of no more than 1 cent per transaction, the same amount currently permitted, in addition to any interchange transaction fee, if the issuer develops a process to reduce the occurrence of fraudulent electronic debit transactions.

The Fed didn’t make any significant changes to an earlier interim rule, which will go into effect on October 1.

The standards include policies and procedures to identify and prevent fraud transactions and update them routinely, monitor volume/value of fraudulent transactions, address suspicious transactions in a way that reduces costs for all parties involved, and secure cardholder data.

These procedures will require annual review with notification to the payment networks that the issuer is in compliance. The fee adjustment will be applied to both PIN and signature debit transactions.

The payments industry had been hoping for a higher fee adjustment, but the Fed largely stuck to its original proposal setting the fee to match median fraud-prevention costs.

American Banker: By Donna Borak

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