WASHINGTON (2/1/11)—Rep. Gary Peters (D-Mich.) joined the growing congressional chorus urging interchange caution. In a recent letter, Peters told the Federal Reserve that its planned interchange
regulations, “if not properly implemented,” could increase costs for consumers, limit consumer choice, and make it harder for credit unions to offer many services to their members. Peters in his letter to Fed Chairman Ben Bernanke noted that credit unions and other financial institutions are concerned that the Fed has not met with them to discuss the issues that interchange regulations could create. House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and Rep. Jeb Hensarling (R-Texas) in their own joint letter to the Fed questioned the speed with which the interchange legislation was moved through Congress. Rep. Barney Frank (D-Mass.) has also written to warn the Fed of unintended and potentially harmful consequences of the interchange provisions, and, according to a recent Bloomberg News
story, is willing to work with House Republicans to alter the Fed's interchange fee proposal. The House Financial Services Committee is set to take up the topic of interchange regulation implementation at a Feb. 17 hearing. The Fed’s interchange plan, which seeks to implement provisions enacted by the Dodd-Frank financial regulatory reform package, offers a dual framework for determining what the law calls "reasonable" interchange fees. One plan would provide issuers with a safe harbor of seven cents per transaction, and set a maximum interchange fee cap of 12 cents per transaction. An alternative framework would simply cap the maximum interchange fee at 12 cents per transaction. These safe harbors and/or caps would be reevaluated by the Fed every two years. The Credit Union National Association (CUNA) has expressed concern over the potential for higher fees or diminished debit card services for credit union members. While merchants have claimed that the savings created by the interchange changes would be passed on to consumers, CUNA President/CEO Bill Cheney in a recent Huffington Post
editorial called those claims “spurious at best.” CUNA has also noted that the Fed’s planned $10 billion interchange regulation threshold would not work in practice, and has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. No financial institution -- and more importantly, none of the millions of Americans who use their services -- is a winner here," Cheney added.