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Most, or 97.6 percent, of respondents to NAFCU's August survey for the Economic & CU Issues Monitor said they employ fraud prevention programs, and more than half expect the costs of such programs to rise in 2011.

Fraud premiums have increased for nearly half, or 47.4 percent, of respondents over the past 12 months, the newsletter reported. In 2010, the average cost of data security measures was $165,376.

Respondents said they were notified of a possible security breach an average of 118 times in 2010. Notifications came most often from a card network (for 44.5 percent of respondents); a fraud prevention service (30.3 percent); members (19.5 percent); and law enforcement (5.3 percent). When notified, credit unions in turn notify their members 73.5 percent of the time and place a fraud alert on accounts in 55.6 percent of cases. In 51.4 percent of cases, they issue new cards.

The average cost of reissuing a payment card was $5.18. An average of 2,354 staff hours were spent handling credit and debit fraud issues, the survey showed.

The August survey follows reports of several high-profile merchant data breaches. Asked about the Michaels Stores breach, respondents said an average of 263 member payment cards per credit union were affected and cost credit unions an average $16,831. One reported that 5,000 cards were compromised; another credit union said costs from that incident totaled $225,000.

Local breaches were even more expensive, with an average of 828 cards affected per credit union at an average cost of $44,311. The greatest number of cards affected was 5,200, the highest cost, $675,000.

Fraud preventionis a factor in a Federal Reserve Board interim final rule on debit interchange fees. The interim rule, effective Oct. 1,allows up to a 1 cent adjustment for institutions that implement eligible fraud prevention measures. NAFCU is seeking members' input to its official comment by Aug. 29; for more, see our Regulatory Alert 11-EA-20.