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Vermont interchange amendment would hurt CUs
MONTPELIER, Vt. (3/19/10)--An amendment to Vermont Senate bill S.138 has brought the controversy over merchant plastic card fees to the statehouse, and it would be a “disaster for credit unions,” said the Association of Vermont Credit Unions (AVCU). Prior to Tuesday’s press conference announcing the amendment, S.138 had primarily dealt with many of the same issues which the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 already addressed at the federal level (NewsLines Express March 19). Those provisions of the bill were removed, leaving only the amendment offered by the Vermont Grocers Association and Vermont Retail Association. The bill seeks to reduce fees that merchants pay to plastic card issuers such as credit unions, and networks and processors. It also seeks to allow merchants to disregard the rules of the credit card networks; rules that, in effect, ensure that a credit union debit card is honored and treated exactly the same way as a debit card issued by a large bank. Both sides of the amendment have already drawn national attention and received support from beyond Vermont’s borders, AVCU said. The Merchant Payments Coalition, which is backed by giant retailers such as Wal-Mart, is supporting the position of the grocers and retail associations. The credit union position--that this potential legislation would severely restrict consumer choice and damage small businesses--is supported by the Electronic Payments Coalition and the Credit Union National Association (CUNA). Select small business owners claiming that the card processing fees they pay every month are driving them out of business joined four state senators to speak about the proposed amendment to S.138 at Tuesday’s Statehouse press conference. They said the fees are confusing, unfair and “abusive.” “This legislation aims to help the Vermont consumer and store owner by prohibiting these abusive practices,” said Senate President Pro Tempore Peter Shumlin. AVCU President Joe Bergeron disagrees. “This amendment as proposed would have a significant negative impact on the very entities it seeks to help … Vermont consumers and small businesses,” he said. “And it would be a disaster for credit unions that are trying to provide the growing variety of card payment options their members demand.” Merchants are seeing rising costs for accepting credit and debit transactions because the sheer volume of these payments has grown significantly in recent years, AVCU said. With the decline of checks and growth of plastic, the responsibility for guaranteed payment has also shifted from the merchant to the card issuer. “Credit unions and other card issuers must absorb the costs of data breaches and fraud over which they have little control,” Bergeron said. “When a purchase is made with a fraudulent card, the merchant gets paid but the credit union takes the loss. Interchange provides help in offsetting a fraction of these ever-increasing costs.” Although the senators have the best interests of consumers and small business owners at heart, the proposed amendment would have unintended consequences that only those who are intricately familiar with card payment systems fully understand, Bergeron added. Vermont merchants now benefit from participating in a national marketplace, and state laws in this area could change that. Vermont merchants could discriminate against credit union-issued debit and credit cards, effectively harming credit unions and their members who depend on their debit cards and credit cards. Customers of Vermont businesses could face unknown circumstances each time they sought to use a card with a Vermont business, diminishing the usefulness of debit and credit cards to the consumer. “The plastic card payment system is a complex arrangement of issuers, processors, and data networks,” Bergeron said. “While we are not unsympathetic to rising small business costs, the solution needs to be studied in greater depth to ensure that this complex system remains equitable and fair for all of its component parts. We’ve already provided significant testimony and education to the legislature in this area and credit unions will continue to do so whenever asked.” CUNA opposes legislation that would affect interchange fees as such action would adversely limit consumer options, competition and technological innovation.
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