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Interchange rule would hurt members says N.C. op-ed
WINSTON-SALEM, N.C. (4/11/11)--The proposed rule on capping interchange fees for debit cards "would put local credit unions at a serious competitive disadvantage" and increase costs for those who use debit cards, said an opinion-editorial written by Marcus Schaefer, president/CEO of Truliant FCU, Winston-Salem, N.C., and published in Thursday's Winston-Salem Journal. The provision known as the Durbin Amendment was passed "without a single hearing, no vote in the U.S. House and little discussion in the Senate," Schaefer said in the article. "Credit unions are owned by their members, and the lost revenue directly impacts the rates we pay on savings, the rates we charge on loans and the fees we have to charge to cover service costs," Schaefer wrote. "Although Truliant will attempt to minimize the impact on our members, consumers generally can expect new fees associated with their debit cards, limits on the amount or number of purchases and elimination of rewards programs and other benefits," he said. Schaefer noted that credit unions use retailers' interchange payments to cover the cost of issuing cards, accessing and maintaining the interchange system and providing services to members. "Big out-of-state banks and major financial institutions can more easily absorb the reduced revenues, potentially resulting in an unfair, two-tiered system where debit cards from local credit unions are more expensive to use. Retailers, in turn, may discriminate against these local cards, inconveniencing members and driving credit unions out of the market. Our member-friendly, no-cost debit card programs could be at risk." He likened the interchange rule to a hardware store being told to charge only the cost of the parts of the lawnmower it sells. Price controls generally stifle competition, impede innovation and hurt consumers, he wrote. "There is also concern that the real impact could be to force modest-means consumers out of the traditional banking system at the worst possible time." Schaefer concluded by urging legislators to "favor reviewing the issue further before allowing implementation." To access the entire article, use the link. The Credit Union National Association is supporting new bills recently introduced in the Senate and House that would delay implementation of the interchange fees provision until further study is made of the rules' unintended impact.
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