Monday, March 28, 2011

Fraud Alert - Fake ACH transaction alert

"The ACH transaction (ID: 8067914072656), recently initiated from your checking account (by you or any other person), was rejected by the Electronic Payments Association." The above communication is an example of a fake email received by one of our members. The email had a fake link included with the message. Please look over the warning message provided below from the National Automated Clearing House Association (NACHA). Further to its notice of February 22, 2011, NACHA has received reports that individuals and/or companies continue to receive fraudulent emails that have the appearance of having been sent from NACHA. These emails vary in content and appear to be transmitted from email addresses associated with the NACHA domain ( Some bear the name of fictitious NACHA employees and/or departments. NACHA itself does not process nor touch the ACH transactions that flow to and from organizations and financial institutions. NACHA does not send communications to persons or organizations about individual ACH transactions that they originate or receive. Be aware that phishing emails frequently have attachments and/or links to Web pages that host malicious code and software. Do not open attachments or follow Web links in unsolicited emails from unknown parties or from parties with whom you do not normally communicate, or that appear to be known but are suspicious or otherwise unusual. If malicious code is detected or suspected on a computer, consult with a computer security or anti-virus specialist to remove malicious code or re-install a clean image of the computer system. Always use anti-virus software and ensure that the virus signatures are automatically updated. Ensure that the computer operating systems and common software application security patches are installed and current.

Friday, March 25, 2011

Op-Ed Letter to the Huntsville Times

Below is the text of a Op-Ed submitted to the Huntsville Times on the interchange fee debate. It has not been published as of this date.
There is an intense debate between financial institutions and retailers over the cost of interchange fee rates paid when a consumer uses their credit or debit card. Retailers think that the cost per transaction is too high. The Federal Reserve has formulated a flat 12 cents per transaction fee that would be paid by the retailer to the financial institution. Currently, the interchange rate fee varies between 1-2 percent of the transaction amount with the average interchange fee costing 42 cents.

The Federal Reserve did not calculate the overall costs of a credit or debit card program, it just computed what the electronic cost was to receive, authorize, and settle the one-time card transaction. The problem with this approach is that the major costs of operating a card program are not being considered. Data processing, 24-hour fraud prevention and detection, personnel, licensing, compliance, and a major expense – fraud, were all costs ignored by the Federal Reserve in computing the flat rate of 12 cents per transaction.

Here’s an example of what the Fed is not taking into consideration: A $2,000 stolen debit card is used at a major retailer to buy a big screen television. Who pays the fraud? Often times the retailer never looks at the card being used. That’s because they are not responsible for the theft amount. The financial institution is left holding the bag for covering the amount of the loss once the unauthorized card transaction is reported. How many 12-cent transactions does it take to cover that $2,000 loss realized by the financial institution? Card fraud occurs every year and retailers pay very little, if any, of the cost.

If the 12-cent flat rate interchange fee is implemented, consumers can expect to see caps placed on purchase amounts to reduce the increased fraud loss exposure. Some have suggested caps of $250 or less on debit and credit card transactions. That major retailer can then enjoy the risks of accepting a $2,000 personal check for that big screen television.

House Bill H.R. 1081 and Senate Bill S. 575 have been introduced by Congress to delay the proposed changes to interchange rates and allow a study to realistically consider the impact on financial institutions and consumers. Financial institutions are hopeful that any changes are done only after a careful analysis of the impact of such legislation is completed. Consumers have shown they want to use debit cards; so let’s not rush to a set price that will ultimately hurt the consumer.
Greg Olmsted, President/CEO
North Alabama Educators Credit Union

Tuesday, March 15, 2011

Financial Institutions versus Retailers

Previous posts have discussed the ongoing feud between financial institutions and retailers over the issue of interchange fees. An interchange fee is a fee paid by merchants when they accept a debit or credit card for payment of a purchase. The merchants now pay a percentage between 1 and 2 percent of the transaction amount depending upon the product or service. The Federal Reserve is now proposing to set a flat rate of $0.12 per transaction on all debit and credit card transactions.

The retailers say that they will pass along the savings from the reduced interchange rates back to the consumers through lower prices of their products and services. This may or may not occur in the short term following the pricing change, but will the savings still be there 5 years down the road when no one is talking about interchange rates anymore?

Institutions will lose revenue if this Federal Reserve proposal is implemented. There is no doubt about that. Our existing card program costs (that were not considered by the Federal Reserve) such as fraud, personnel, data processing, licensing fees, compliance, and 24-hour monitoring will still be there. Additional fees would have to be implemented on checking accounts and credit cards to make up the lost revenue.

Credit unions are urging Congress to step back and conduct a compete analysis of all costs associated with maintaining a debit and credit card program. There should be an economic impact review of this Federal Reserve proposal. It may be time for changes in the interchange fee structure, but the process used to calculate the proposed $0.12 flat rate is flawed and will cause more harm than good to consumers.