Interchange fee rule doesn’t mandate specific fraud prevention technologies

In its final rule on interchange fees, the Federal Reserve did not mandate banks use specific technologies for fraud prevention adjustments.

The rule was a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that capped the fees banks charge retailers for each debit card transaction, known as interchange fees, reports.

The Fed included an adjustment to offset interchange losses that card issuers said would adversely affect their abilities to absorb fraud related to debit transactions. The adjustment allows card issuers that invest in "new and improved" fraud prevention solutions tied to debit to receive 24 cents per transaction.

The rule does not specify the policies and procedures that must be maintained to be eligible for the adjustment, according to the Credit Union National Association. Instead, the rule requires that an issuer’s policies and procedures include fraud prevention technologies and other methods or practices “reasonably designed to detect, prevent and mitigate” fraudulent transactions.

Banking institutions may have more incentive now to initiate investments without regulatory pressure, according to Investments in EMV technology are already being made by MasterCard and Visa in order to enhance security and fraud protections.

Another potential alternative for recovering fraud loss includes documenting the losses, which the Fed would then allow banks to add to their interchange fee for compensation

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