The Federal Reserve Board on Friday announced the approval of a final rule that amends the provisions in Regulation II (Debit Card Interchange Fees and Routing). The provisions permit a debit card issuer who is subject to the interchange fee standards to receive a fraud-prevention adjustment.
The final rule revises provisions that are currently in effect as an interim final rule. Under the final rule, an issuer will be eligible for an adjustment of no more than 1 cent per transaction — the same amount as in the interim final rule — if it develops and implements policies and procedures that are designed to reduce the occurrence and costs of fraudulent debit card transactions.
The final rule makes changes that simplify the elements required as part of in an issuer's fraud-prevention policies and procedures. To receive an adjustment, an issuer must review fraud-prevention policies and procedures and their implementation on an annual basis, at minimum.
An issuer also will be required to update policies and procedures as necessary in light of their effectiveness and cost-effectiveness and, as currently required, in light of changes in the types of fraud and available methods of fraud-prevention.
The final rule retains and clarifies the requirement that an issuer must annually notify the payment card networks in which it participates of its eligibility to receive the adjustment.
In addition, the final rule explicitly prohibits an issuer from receiving or charging a fraud-prevention adjustment if the issuer is substantially noncompliant with the Board's fraud-prevention standards. The rule describes steps an issuer must take once it becomes substantially noncompliant in order to requalify for the fraud-prevention adjustment in the future.
The amendments are effective on October 1, 2012.
See the final rule.
For more on this topic, visit the regulatory issues research center.