WASHINGTON (10/3/11)—The Credit Union National Association (CUNA) is urging the Federal Reserve to increase the amount of per transaction fees that debit card issuers receive to cover their costs associated with fraud prevention. Though the Fed’s approach to add the fraud coverage charge is a positive development, CUNA recommended in a joint comment letter that the Fed allow four or five cents per transaction for fraud rather than the one cent that the agency proposed. That adjustment would better cover costs that are incurred when financial institutions investigate the source of a data breach or theft, attempt to stop any instances of fraud, and deal with the aftermath of the theft or data breach. The increased fraud prevention adjustment would also help protect smaller issuers whose fraud prevention costs often represent a larger portion of their total debt card program costs. The current level of one cent “acts as a disincentive for all issuers to develop and apply new technologies that require significant costs upfront but have the potential for substantial long-term reductions in fraud losses, because there is no guarantee that the [Fed] will later revise the adjustment amount or permit compensation for past expenditures,” the letter added. CUNA also recommended that the Fed periodically revisit the fraud prevention cost issue to see if the costs have changed and whether any future adjustments are necessary. The Fed is required to study and report on how the debit interchange fee cap has impacted merchants, consumers and financial institutions within the next two years. The letter was cosigned by CUNA, the American Bankers Association, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, the National Association of Federal Credit Unions, the Midsize Bank Coalition of America, the Clearing House Association, and the Clearing House Payments Company. It was sent to Fed Chairman Ben Bernanke, U.S. Treasury Secretary Tim Geithner, National Credit Union Administration Chairman Debbie Matz, and several other leaders of federal finance agencies. The Fed’s final interchange rule, which became effective over the weekend, sets a debit interchange fee cap of 21 cents and allows an additional five basis points of the value of the transaction to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed-established fraud prevention standards. Credit unions and other institutions with under $10 billion in assets are exempt from the rate cap provisions of the rule. For the full comment letter, use the resource link.