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April 21 State of the interchange rule
WASHINGTON (4/21/11)--Today was the original statutory deadline for the Federal Reserve's final interchange fee cap proposal, but, as the agency announced last month, the day will come and go without a final plan being unveiled. CUNA and credit unions continue to advocate for a delay of the pending Fed rule, which is still set to go into effect on July 21. CUNA is concerned that the Fed's delay of the April 21 launch date may not give credit unions and other financial institutions the time needed to evaluate and respond to a final proposal before it goes into effect. The interchange provisions could lower the maximum fee charged per debit card transaction to 12 cents. The legislation, as currently written, would exempt credit unions and other small institutions with assets of $10 billion and under from the terms of the regulations. However, there is much debate over whether this proposed exemption would work as planned. The legislation is being challenged on several fronts. One such front is the halls of Congress, where legislation that would delay implementation is pending. The bills also would order a study of the impact a debit card interchange fee cap would have on consumers, financial institutions, and merchants. In the House, Rep. Shelley Moore Capito’s (R-W.V.) H.R. 1081 has 84 cosponsors. The Senate version of interchange delay legislation (S. 575), introduced by Sen. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), has 16 co-sponsors. The effort to add additional sponsors to these two pieces of legislation has moved to legislators’ home districts this week. CUNA, state credit union leagues, and credit unions nationwide are collaborating on a grassroots "Call on Congress" campaign, and other outreach and education efforts are being made in an effort to convince Congress and the Fed to "stop, study and start" over on interchange. CUNA and the leagues' own legislative advocacy actions so far have helped credit unions generate nearly 150,000 contacts to Congress nationwide, and more contacts are expected. Interchange legislation has also been challenged in the courts, with TCF National Bank bringing its own suit against the Federal Reserve. TCF’s suit, which was filed last October, states that the government cannot write laws that would arbitrarily prevent a given business from recovering its costs sufficiently to avoid losses on its various business operations. It also alleges that portions of the Dodd-Frank Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional, and argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. For more on CUNA's interchange delay efforts, use the resource link.
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