Authorities discovered nine card-skimming devices attached to local ATMs last week that caused thousands of dollars of fraud losses to area institutions, including $5,538 in fraudulent cash withdrawals from members’ accounts at Hughes Federal Credit Union.
Reimbursement for the fraudulent withdrawals, however, were not the end of expenses for the credit union, which also spent employee resources to contact members, block card transactions and reissue new cards, and enact strategies to decline transactions on the compromised cards.
This is the latest example of credit-union expenses incurred in offering debit cards that are not being figured into the Federal Reserve Board’s proposal to cap interchange on debit transactions, according to Carla Craig, vice president of operations for the $510 million credit union.
“The fraudster captured card numbers, including PINs, and made ATM withdrawals at ATMs in another state,” Craig told the Fed in a comment letter last week. The credit union credited back to each member the amount of cash withdrawn with the fraudulent cards, she said.
The inability to count fraud-related expenses is among the main criticisms being leveled by credit unions and banks at the Fed’s proposal, scheduled for a final vote in April and enactment in July.
As with many credit-union executives, Craig said legitimate costs incurred in operating a debit card program, such as fraud prevention and resolution, should be included in determining the interchange-rate cap. She listed these as overhead, including call centers; plastic; issuance costs; exception processing, including charge-backs, disputes and arbitration; fraud prevention and losses; technology, such as data security; and payment infrastructure.
In her comments, Craig did not say whether the owner or owners of the ATMs where the skimming occurred reimbursed the credit union for its fraud-related losses. Card issuers pay interchange to ATM acquirers, which use the funds to recoup their costs.
The Fed’s proposal only addresses the interchange applied to purchase transactions, in which merchant acquirers pay card issuers interchange.
