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CUNA Hearings on Fed interchange proposal needed
WASHINGTON (1/4/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney on Monday urged the House Financial Services Committee to hold hearings on the Federal Reserve’s debit interchange proposal as soon as possible, with an eye toward encouraging the Fed to delay full implementation of the interchange rule until after these hearings are held and a comprehensive congressional review has been completed. The Fed’s interchange provisions, which were released just before the end of the year, could 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. The Fed proposal will remain open for public comment until Feb. 22. Fed officials during their December meeting said that the interchange provisions, if ultimately approved, would likely not become effective until after April. Cheney in the letter to House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) and ranking member Rep. Barney Frank (D-Mass.) noted that no congressional hearings were held on the interchange provision prior to its enactment, and that there is virtually no legislative history regarding the amendment. “This is troubling given the fact that the legislation to which it was attached received considerable consideration by both chambers and was subject to an exhaustive conference committee process,” Cheney added. Hearings on the interchange issue would be timely and critical, and would help determine how best to ensure that credit unions and other small issuers are not subjected to the artificially low debit interchange fee structure the Fed is proposing for large issuers, Cheney added. In a letter to the lawmakers, Cheney argued that the interchange provisions could have tragic consequences for credit unions, and would impact all users of debit cards. Cheney noted that the interchange amendment lacks an enforcement mechanism for the small issuers’ exemption, and said that there is no guarantee the payment card networks will operate a two-tiered system the exemption necessitates for small issuers. Bachus and Rep. Jeb Hensarling (R-Texas) in a recent letter to the Fed questioned the speed with which the interchange legislation was moved through Congress. Frank last month also contacted the Fed, noting that the implementation of still-pending interchange regulations, if not properly crafted, "may have unintended consequences" for credit unions and consumers. (See related story 12/23/10: Bachus, Hensarling: Could $10B exemption harm CUs?) For the full comment letter, use the resource link.


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