WASHINGTON (6/22/10)— The Credit Union National Association (CUNA) said Monday that credit unions "would almost certainly" have to oppose a final financial regulatory reform bill unless lawmakers remove or significantly change even the modified debit interchange provisions put forward yesterday by House conferees. CUNA is studying changes offered Monday by House lawmakers to interchange language, which could be included in a final financial regulatory reform package currently being worked out by a House-Senate conference committee. In a letter to the top members of the House Financial Services Committee and the Senate Banking Committee, CUNA President/CEO Dan Mica wrote that CUNA continues to have “grave concerns regarding the affect that these provisions would have on credit unions and their members.” The letter was also sent to each conference committee member. Both House and Senate versions of the interchange language would require the Federal Reserve to set interchange fees, considering only certain factors in the price-setting formula. In its letter, CUNA continued to encourage the conferees to remove the interchange language from the base text of the reform bill, or to adopt a “more realistic and fair delineation of costs” to be considered and to add enforcement provisions to the prohibition of merchant discrimination against credit unions’ cards. The CUNA letter noted that in lieu of the language’s removal or significant improvement, CUNA and credit unions would “almost certainly” oppose the enactment of the larger reform package. CUNA and credit unions have waged an exhaustive effort against the interchange provision, arguing that it would save merchants money on their costs of doing business while taxing consumers with new fees. CUNA and the leagues organized a national Hike the Hill effort on the interchange issues earlier this month, drawing hundreds of credit union activists to Capitol Hill to meet with legislators. Those in-person visits have been backed by more than 600,000 email and phone contacts on the subject. Both House and Senate versions of the interchange provision offer a carve-out for issuers with less than $10 billion in assets. Critics—including CUNA—have argued that the carve out would not work and could cause additional problems for smaller issuers, who could be pushed aside by favorable deals between merchants and big issuers. “The House offer fails to address the most significant concern of credit unions; specifically that the carve-out envisioned by the provisions is unworkable and not meaningful,” CUNA’s Mica wrote. “Nothing in the House offer directs the payment card networks to operate the two-rate system that would be necessary for the carve-out to work; nothing in the House offer includes enforcement provisions to require merchants to accept credit union cards were a two-rate system to exist; further, the legislation provides significant disincentives for payment networks to honor the carve-out,” Mica pointed out. The CUNA letter also reiterated serious concerns that the interchange provision will result in an “articificially low debit interchange rate” that would force small issuers to recoup losses “through other means.” While the Federal Reserve is directed by the House language to consider fraud prevention costs when fixing the debit interchange rate, it is specifically prohibited from considering other operational costs. “While we oppose the government price-fixing proposed by this legislation, if the government is going to set a price, we believe that all costs should be taken into consideration,” the letter said.