WASHINGTON (8/6/13)--The Credit Union National Association will meet with a broad coalition of finance industry representatives this week to chart a response strategy and approach to last week's U.S. District Court decision striking down the Federal Reserve's price caps on debit interchange fees.
CUNA also is contacting Federal Reserve staff to detail the negative impact of the ruling on credit unions and other small card issuers as that agency considers an appeal.
"While the Fed will make its decision independently, CUNA will make sure that Fed attorneys are aware of the potential negative impact of this decision on credit unions," CUNA General Counsel Eric Richard said.
U.S. District Court for the District of Columbia Judge Richard Leon last week ruled the Fed did not follow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment. The court vacated the Fed's rule, finding that the agency disregarded Congress's intent when deciding how much financial institutions can charge merchants for debit card transactions.
The judge left the rule in place for the time being, pending the Fed's issuance of new rules; however, there will be additional briefings to determine the length of time the existing rule can stay in place. A hearing has been set for Aug. 14.
Richard said the court's decision will challenge credit unions to continue their debit card programs without incurring drastic cuts in revenue, or imposing additional fees on their members. Credit unions with under $10 billion in assets will still be shielded from the interchange rule, he emphasized.
The court decision will not immediately impact interchange regulations. Those rules will stay in place for the time being. However, CUNA notes, all issuers, regardless of size, will be affected by the decision and the Durbin regulation with regard to routing and exclusivity provisions.
The Fed interchange standard limits debit interchange fees for issuers with assets of $10 billion or more to 21 cents, and allows an additional five basis points per transaction to be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.