Last
week, the Federal Reserve Board (Board) published the final rule
on fraud-prevention cost adjustments allowed under Regulation II (the Durbin
Amendment). As you may recall, the Board’s Durbin Amendment final rule issued
last July allowed for a provisional, one cent fraud-prevention adjustment in
addition to the 21 cent and ad valorem
rates. The Board asked for additional information and comments on fraud-prevention
standards in the marketplace and suggested it may increase the adjustment
depending on the data received.
The
Board’s final rule that takes effect October 1, did not change the one cent
fraud-prevention adjustment standard. The final rule requires an issuer to
develop policies and procedures reasonably designed to detect fraud in order to
receive the fraud-prevention adjustment. Required elements of these policies
and procedures should include:
- Identify and prevent fraudulent electronic debit
transactions
- Monitor the incidence of, reimbursements received
for, and losses incurred from fraudulent electronic debit transactions
- Respond appropriately to suspicious electronic debit
transactions so as to limit the fraud losses that may occur and prevent
the occurrence of future fraudulent electronic debit transactions
- Secure debit card and cardholder data
Issuers
must inform its payment card networks annually of its fraud-prevention compliance
program in order to receive the one cent adjustment under Reg II.
I
will provide additional thoughts on the Board’s final rule during the next
Legislative & Regulatory call on Wednesday, August 8 at 2 p.m. EDT.
