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Interchange rule hits CUs and consumers hard says league president
LAS VEGAS (3/23/11)--Consumers nationwide would face increased fees when using their debit card if pending legislation before Congress becomes law, according to a speaker at a Credit Union National Association (CUNA) conference last week. Credit unions face a $1.5 billion annual price tag if the debit interchange fee regulation goes into effect, Diana Dykstra, president/CEO of the California and Nevada Credit Union Leagues, said Friday during the 18th Annual CUNA Marketing & Business Development Council Conference in Las Vegas. At issue is Section 1075 of the Dodd-Frank Act, the Interchange Amendment, which lacks any enforcement mechanism to protect small issuers such as credit unions. “We’re exempt, but there are no rules to protect us,” Dykstra said. “We can’t afford to take a $1.5 billion hit.” Credit unions should budget to receive 30% less in interchange income this year, and 70% less income six to 12 months after the interchange legislation’s implementation, she added. Magnifying the impact of potential cuts to interchange income are insurance fund assessments and declining revenues due to the economic slowdown. “Marketing is hit the hardest by budget cuts during tough times,” Dykstra said. She called upon conference attendees to contact elected officials about this issue, and to encourage friends and colleagues to do the same. The interchange provisions, which were passed as part of comprehensive financial regulatory legislation last year, direct the Fed to write rules on interchange fees for debit card purchases. While the interchange provision exempts small credit unions and other financial institutions with under $10 billion in assets from any interchange changes, these institutions would still be impacted directly by whatever rates are established, CUNA says. CUNA opposes the cap on interchange fees and has told federal lawmakers that such action would harm consumers by driving up costs of debit cards, limiting consumer options, competition and technological innovation. Interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants, CUNA says. Other key issues facing credit unions discussed at the conference are:
* Pending member business lending legislation. Dykstra acknowledged that although many credit unions don’t offer business services, the legislation is important to the movement as a whole.“We need an environment where all credit unions can thrive,” she said. “And, business lending might be important for your credit union five years from now.” * Supplemental capital. Too many credit unions are dealing with capital constraints by shrinking their assets. “That’s not acceptable,” Dykstra said. * Deficits. Cash-strapped states and the national government are looking everywhere for income, which requires constant vigilance about protecting the credit union tax exemption.
“We don’t think the government will set out to tax credit unions,” Dykstra said, but the movement needs to watch for last-minute amendments tagged onto other legislation. “It could be the Durbin Amendment all over again.”
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