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NAFCU wants the Fed to revise fraud adjustment in Durbin Amendment

Fred BeckerThe National Association of Federal Credit Unions wants the Federal Reserve to revise the one cent fraud adjustment allowed for debit interchange transactions fees that it wrote in its Durbin Amendment rule-making language.

Fred Becker, NAFCU's president, released an official statement days before the rule is scheduled to take effect, charging that the one cent fraud adjustment is inadequate because it only requires the median amount for fraud costs reported by issuers, according to NAFCU.org.

In the Durbin Amendment, the Fed capped the amount of debit interchange to a maximum base fee of 21 cents, plus five basis points for debit interchange transactions. In addition, the final rule allowed card issuers to add up to one cent per transaction to regain a portion of the costs used for fraud prevention.

Becker wrote that financial institutions need to constantly adapt to new types of cyber criminal attacks and that using a lower cost level to determine the fraud adjustment “makes little sense,” according to NAFCU.org.

Becker suggested that the Fed should consider the fraud costs for institutions with less than $10 billion in assets because the capped rate will likely become the default rate.

The Fed based the rule’s fraud cost language on institutions with more than $10 billion in assets, however, the underlying statute gives the Fed discretion to consider factors it deems appropriate.

Becker has made comments regarding other new Fed rules, including requiring debit card issuers to measure whether rewards programs have “inappropriate” incentives to encourage an authentication process that is less effective at preventing fraud.

The NAFCU also objects to rules that would establish a certification process and reporting period for issuers to prove they comply with the Fed’s fraud prevention standards.

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