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Bachus Hensarling Could 10B exemption harm CUs
WASHINGTON (12/23/10)—While well intentioned, the Federal Reserve’s proposed $10 billion in assets threshold for interchange rule exemptions could create “an unlevel playing field” for credit unions and other small issuers “by making their cards more expensive for merchants to accept,” Reps. Spencer Bachus (R-Ala.) and Jeb Hensarling (R-Texas) said in a recent letter to the Federal Reserve. The letter also questioned the speed with which the interchange legislation was moved through Congress, and recommended that the Fed extend the deadline for final rules beyond the current April 21 deadline. “Given the broad scope of this required rulemaking and the enormity of its potential impact on consumers and merchants alike, we doubt that such an extremely short timeframe will be sufficient to produce thorough and thoughtful final rules that consider the myriad perspectives of all affected parties,” the letter said. Bachus and Hensarling also noted that the House Financial Services Committee only held one hearing before the legislation was enacted earlier this year. The Fed, before moving forward with its rulemaking, should use “the full amount of time under its disposal” to review all available comments on the interchange proposal. Reviewing the comments, and allowing Congress to proceed with its own review of the intent and impact of the interchange proposal, would help the Fed to produce rules “without unduly causing harm to consumers or competition in the marketplace,” the letter added. The Fed proposal, which was released last Thursday, would cap debit card interchange fees that are paid by merchants to card issuers at 12 cents per transaction. Issuers with under $10 billion in assets would be exempt from the interchange changes. Bachus will begin his tenure as Chairman of the House Financial Services Committee when the 112th Congress begins in January. Hensarling will serve as vice-chair. Outgoing Financial Services Chair Rep. Barney Frank (D-Mass.) in his own letter to the Fed said that the implementation of still-pending interchange regulations, if not properly crafted, "may have unintended consequences" for credit unions and consumers. Credit Union National Association (CUNA) President/CEO Bill Cheney recently criticized the proposal, saying that the loss of interchange fee income for small issuers and the costs of having to belong to more payment networks will have a "horrendous impact" on credit unions that offer debit cards, as well as their ability to build net worth. Cheney also expressed skepticism at the effectiveness of the $10 billion exemption cap, noting that there is nothing in the Fed's proposal that creates an enforcement mechanism to protect small issuers. The Fed has left its proposal open for public comment until Feb. 22, and CUNA continues to develop comprehensive comments for the Fed.


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