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Interchange discussions will lead Dec. 16 Fed meeting
WASHINGTON (12/13/10)—Interchange amendments will be on the agenda when the Federal Reserve holds its December open meeting this Thursday. The debit card interchange fee regulations, which will amend Regulation E, Electronic Fund Transfer Act, are required under the Dodd-Frank Act. The Fed meeting will take place at 2:30 p.m. ET and will be the first Fed meeting to be broadcast live on the internet. The debit card interchange provisions that were passed earlier this year as part of comprehensive financial regulatory legislation direct the Fed to write rules on the structure for interchange fees in connection with the debit card transactions involving larger issuers. While the interchange provision exempts small credit unions and other financial institutions with under $10 billion in assets, as well as certain government programs and prepaid cards, from any interchange fee structure rules, the impact of the Fed’s rule could nonetheless be severe for these entities. Larger issuers have also expressed grave concerns about how much their debit interchange fee income could decrease once the rule takes effect. Under the Dodd-Frank Act, the final debit interchange rule is supposed to be final by April 21, 2011. “No one outside of the Fed, except possibly key folks in Congress and the Administration, know how the Fed proposes to handle the complex issues presented under the Durbin interchange amendment,” Credit Union National Association (CUNA) President/CEO Bill Cheney said on Friday. CUNA, following the meeting, will work closely with leagues, credit unions and its interchange working group to coordinate a response to the Fed and other key policymakers, Cheney added. “We want to do everything we can to help ensure the rule is implemented as favorably as possible, despite the deficient language contained in the Dodd-Frank Act,” Cheney said. CUNA expects the interchange proposal to have a shortened comment period due to the approaching April 21 statutory deadline. Ahead of the Thursday meeting, CUNA encouraged the Fed to support congressional efforts to delay implementation and allow further consideration of interchange rules. However, if a delay is not an option, CUNA urged the Fed “to consider phasing in requirements to the greatest extent permissible” to “facilitate compliance and minimize disruption to the operations of issuers, networks, and processors.” Specifically, CUNA called on the Fed to use the authority granted to it by the interchange rule to “help ensure” that financial institutions with under $10 billion in assets are exempt from the terms of the new interchange regulations. The Fed could develop amendments or recommend legislative changes to Congress to “help ensure the exemption for small issuers is feasible,” the CUNA letter adds. The Fed should also allow merchants to have routing choices that will help limit their costs, a move that CUNA said could avoid situations in which merchants route debit card transactions “in a manner that disadvantages small issuers.” A group of 13 senators also voiced their concerns over proposed interchange regulations and encouraged the Fed to “take sufficient time to gather and analyze all of the relevant facts” before issuing a proposal. (See related story: Senators urge greater interchange consideration) For CUNA’s letter to the fed, use the resource link.


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