Bank Lobbyist: High Debit Interchange Needed To Pay For Retail Security Breaches

What's the real price of a security breach? Customers aren't usually driven away when a retailer loses payment card data, and the financial costs are usually painful but not crippling. But if one Beltway lobbyist gets its way, the price of security failure will be higher interchange fees for debit cards—not just for breach victims, but all retailers. The Center for Regulatory Effectiveness asked the Federal Reserve Board last Friday (May 13) to raise interchange rates, which were pushed down by last year's Dodd-Frank Act. The argument: Retail security breaches cause unreimbursed costs for card-issuing banks, and banks need high interchange rates to pay those costs.

If the Fed buys the argument, that would certainly put a real pricetag on security failures. Of course, that price would have no relationship at all to whether a retailer had lousy security—everyone would see higher debit interchange fees, whether you're locked down tight or leaking data everywhere. And the lobbying outfit used one other nice touch: Instead of asking the Fed directly to raise interchange rates, it sent a letter to the Fed's CIO, asking her to make the pitch. Hey, they had to try somebody.