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The Other Interchange Story: Store-Issued Debit Cards

The headlines in the financial industry are full of stories about the battle on debit card interchange regulations.  The untold story about store-issued debit cards may eventually have even more impacts on your interchange income and your ACH transaction processing.

Although store-issued debit cards have been around for several years, they have recently become more popular as merchants attempt to reduce their costs for payment processing.  These debit cards route transactions through the ACH network to the consumer’s checking account, and bypass the traditional card networks (VISA, MasterCard, etc.) and their interchange fees.  Transactions are posted as ACH debit entries to your members’ accounts. 

Many grocery stores, department stores, and gas stations around the country are the originators of the entries.  Because the ACH entries are much less expensive to process than traditional debit card transactions, the merchants are passing on the savings to consumers in the form of merchandise discounts or rebates.  These rebates are the primary attraction for your members to use the new store-issued debit cards.

In addition to the interchange income impact, these new debit cards may also require some training for your staff and members.  Credit union employees need to be able to distinguish the ACH debit postings from the normal VISA / MasterCard debit card postings, and explain the differences to your members.  ACH debit postings probably appear in a different format on your members account.  Disputed entries are processed under the ACH rules using the Written Statement of Unauthorized ACH Debit form.  Keep in the mind that the expanded warranties and chargeback rights under the VISA and MasterCard networks will not apply to any ACH processed debit card entry.

Now is the time to learn more about these new debit cards before they can cause confusion or misunderstandings for your staff and members.  Check your ACH postings for debit entries from retailers with the POS (Point-of-Sale) entry class codes.  You may be surprised on the volume of these debit card entries that you are already posting to member accounts.  Expect that volume to grow. Take this opportunity to educate your staff and members on this new development in the payments industry, and the implications for your credit union.

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Stopping Check Fraud on the Teller Line

Credit unions continue to suffer losses from check fraud despite declining check usage.  Many of these losses are caused by counterfeit or altered checks presented for deposit to your front line staff.  Increased access to sophisticated technology has made this type of check fraud an easy crime to commit.  Scanners, check printing software, and quality printers are just a few of the tools available to anyone.  Here a few suggestions to combat check fraud on your check deposits.

Check printing companies help to deter check fraud by including common security features that make it difficult for criminals to produce counterfeits.  Tellers should be familiar with watermarks, micro printing, pantographs, and security screens.  These features can assist your staff to verify the authenticity of checks received for deposit.

Other signs of possible counterfeit checks include invalid routing numbers, missing or mismatched check numbers, misspelled preprinted words, and the lack of perforations.  Some obviously invalid signatures should alert you to a counterfeit as well.  We have seen several counterfeit cashier’s checks lately signed by George Washington or Benjamin Franklin – among the many signatures available from Internet sites like Wikipedia!

Tellers should also examine checks for possible alterations of dollar amounts or payees.  A cloudy or bleached area, or erasure marks on the check are common signs of alteration.  Other signs are irregular printing of either payees or dollar amounts.  Also make sure that the courtesy amount agrees with the legal amount.

Finally, if your tellers don’t discover the counterfeits or alterations, your check imaging system for processing deposits may alert them to possible problems.  Investigate any warnings or cautions provided by your system.  Rather than just overriding these messages from your system, remind tellers to manually inspect the checks again before proceeding with deposit processing.  It may add some time to the processing tasks, but it may also prevent a significant loss to your credit union.

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