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Cheney in op-ed Congress must pass interchange delay before its too late
WASHINGTON (6/3/11)—With regulations that would set a cap on interchange fees charged during debit transactions set to come into effect in late July, Congress must, at the very least, recognize the severity of the situation for credit unions and their members and take another look "before it's too late,” argues Credit Union National Association (CUNA) President/CEO Bill Cheney in an op-ed being distributed to more than 400 news outlets across the country. The Federal Reserve Board's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but CUNA, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. The interchange fee reduction would result in a $15 billion-plus windfall for merchants, Cheney noted, “with no evidence, and no requirement, that they pass their gain back to their customers.” Cheney explained in the op-ed that the “highly advanced and consumer-friendly” debit card network costs money to operate and, until recently, the merchants who used the system paid for it, usually at about 1% to 2% per transaction. Cheney's op-ed is being carried by a number of papers around the country that subscribe to the McClatchy-Tribune News Service. The existing fee structure has spurred the creation of an enormous variety of free payment cards from credit unions, community banks and major institutions, Cheney noted. But under the fee cap statute slipped into last year's Wall Street reform legislation by giant retailers, Cheney said, the $15-billion windfall for merchants is going to have to be made up by credit unions and others that issue debit cards. “For the big banks that may mean that customers pay more, get fewer services and/or shareholders make less profit. And even with their enormous resources, in some cases they have already raised their fees to address the reduced revenue. “In a credit union, however, it's all about the consumer-member--who is also the owner. As not-for-profit institutions, extra revenue gets channeled back to the credit unions' membership as higher savings yields, lower loan rates and lower fees. Last year, these savings to credit union members amounted to more than $6.5 billion,” Cheney said. Noting that the interchange provisions were added to the Dodd-Frank Wall Street Reform Act “with no serious review and very little debate,” Cheney said that “any regulation directly affecting so many Americans should have received proper study before it was passed.” House and Senate legislation that would delay interchange cap implementation and require a study of the cap’s impact on consumers, financial institutions, and merchants remain active in Congress. Merchants are fighting to maintain the status quo and let the interchange cap go forward, and a merchant op-ed appeared opposite Cheney’s editorial in the McClatchy-Tribune News Service on Thursday. CUNA and credit unions continue to fight for an interchange delay, and Cheney recently called on credit unions and their supporters to continue to press their local legislators for a delay. (For prior coverage of this push, use the resource link) Capitol Hill-based publication Roll Call reported that the next front in this debit interchange fight may be state legislatures, where pro-retailer groups are promoting legislation that would allow merchants to select which card providers they would work with based on fee structures. For the CUNA editorial and Roll Call’s recent coverage, use the resource links.
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