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CUNA analyzes interchange rules impact
WASHINGTON (7/28/10)--The Credit Union National Association (CUNA) has said that while credit unions with under $10 billion in assets are exempt from interchange regulations the Federal Reserve Board is writing, CUNA is particularly concerned that the law does not require the marketplace to accommodate higher fees for smaller issuers. CUNA has prepared a detailed review of the new interchange statutory provisions. The review focuses on provisions of the law as well as on concerns regarding the law and its implementation. The new interchange regulations, which are still in development will be the result of legislation that was added to recently enacted comprehensive financial regulatory reforms. The interchange law directs the Federal Reserve Board to write rules on interchange fees for debit card purchases, a move which CUNA and credit unions strongly opposed as the legislation was considered by the U.S. Congress. Though the new interchange law amends the existing Electronic Fund Transfer (EFT) Act by adding a new section, the interchange regulations will be implemented by the Federal Reserve, not the new Consumer Financial Protection Bureau, which will implement other laws, including other provisions of the EFT Act. The Fed will be required to consult with the National Credit Union Administration and other financial regulators, including the new Consumer Financial Protection Bureau, as it crafts the interchange regulations. According to CUNA's analysis, it is unclear whether the Fed’s rule will set the actual interchange rates or set standards for determining whether interchange fees are “reasonable and proportional” to an issuer's costs. There has been no definitive statement from any federal authorities on how interchange rates will be regulated. While CUNA is advocating two-tiered interchange fee system to accommodate credit unions, pressure from merchants to contain interchange fees will continue. It is also unclear to what extent and for how long networks will accommodate a two-tiered system, CUNA added. Even so, CUNA will be pursuing as favorable an outcome as possible from the Fed, with the assistance of CUNA's Interchange Working Group. As reported earlier in NewsNow, CUNA President/ CEO Bill Cheney met last week with House Financial Services Chairman Barney Frank (D-Mass.), who assured CUNA he would work with credit unions to head off unintended consequences of interchange regulation. The CUNA analysis also addresses certain prohibitions on exclusive arrangements, routing limits, and network fee regulations. The potential for merchants to provide certain discounts and to set transaction minimums for credit card purchases, as well as issues concerning merchant acceptance of debit and credit cards, are also covered in the CUNA analysis. For more information about the analysis, contact Eric Richard at erichard or Mary Dunn at For the full report, use the resource link.


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