The Federal Reserve Board last week announced approval of a final rule that allows debit card issuing banks with more than $10 billion in assets to charge a one cent fraud prevention fee. The final rule is the same as the preliminary rule issued by the Federal Reserve last year as it sought to enforce the debit reform passed by Congress in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under the rule, which takes effect Oct. 1, an issuing bank must annually review its fraud policies and procedures in addition to consistently updating its program as necessary. Additionally, the final rule maintains a requirement that an issuing bank must notify the payment card networks every year as to whether it expects to receive the fee. The final rule also prohibits an issuing bank from receiving a fraud-prevention fee if the institution is largely noncompliant with the Federal Reserve’s fraud-prevention standards.
The Merchants Payments Coalition, of which NATSO is a member, criticized the rule, saying the Federal Reserve is making merchants pay for fraud prevention even if banks don't prevent fraud. The coalition said that the rule will be ineffective and that regulators should examine whether banks actually prevent fraud before they receive funds.
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