FTC Interchange Report: Incomplete, Misleading

01/08/2013
  • overview

FOR IMMEDIATE RELEASE

Contact:
Patrick Keefe – CUNA Communications; (202) 508-6765; pkeefe@cuna.coop

WASHINGTON, DC (01/08/2013) - A report by the Federal Trade Commission (FTC) on the impact of new laws capping revenue from interchange fees presents an “incomplete and thus misleading view of the impact on credit unions,” CUNA has written to the agency.

CUNA wrote that the 11-page report, released two weeks ago, includes only four paragraphs on the effects of the debit interchange provisions on small banks and credit unions and relies on “selective information” from Federal Reserve and Government Accountability Office (GAO) reports.

“The FTC’s study does not include significant information from the GAO report that helps to present a more complete assessment of the impact of Section 1075 on credit unions and small banks,” CUNA wrote. (The citation refers to the interchange fee section within the 2010 Dodd-Frank Act).

CUNA pointed out that the GAO report also stated: “The (Federal Reserve Board’s) data also show that the average interchange fee received by exempt issuers (credit unions and small banks) declined by $0.02 or around 5 percent, after the rule took effect, declining from $0.45 over the first three quarters of 2011 to $0.43 in the fourth quarter of 2011 (parentheses added).

The GAO Report continued, CUNA noted: “…(C)oncerns remain about the potential for their (credit unions and community banks) interchange fees or fee income to decline over the long term (parenthesis added).”

CUNA noted that the impact of Section 1075 is "a very important issue for credit unions and their members. Congress intended for credit unions and small banks to be exempt from the impact of the regulation of debit interchange fees, not just from the wording of key provisions of the rule. In order to ensure that outcome, it is imperative that agencies such as the FTC are as accurate as possible in reporting on debit interchange fees.”

CUNA President and CEO Bill Cheney, in signing the letter, stated he would “welcome the opportunity to talk with you further about our concerns.”

The complete text of CUNA’s letter follows:

- - - - - - - - - - - -

Jan. 8, 2013

The Honorable Jon Leibowitz
Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Dear Chairman Leibowitz:

On behalf of the Credit Union National Association, I am concerned about the recently released “Federal Trade Commission Report on Activities Related to Section 1075 of the Dodd-Frank Act.” The report presents an incomplete, and thus misleading, view of the impact on credit unions of the statutory provisions that address debit interchange fees and related issues.

The FTC’s study was required by Congress under the FY2012 Omnibus Appropriations Legislation (P.L. 112-7). The eleven-page report includes only four paragraphs on the effects of the debit interchange provisions on small banks and credit unions. It relies on selective information from a May 2012 Federal Reserve Board study and from a September 2012 Government Accountability Office report, GAO-12-881, “Community Banks and Credit Unions: Impact of the Dodd-Frank Act Depends Largely on Future Rule Makings.”

The FTC’s study does not include significant information from the GAO report that helps to present a more complete assessment of the impact of Section 1075 on credit unions and small banks. The GAO report noted:

The (Federal Reserve Board’s) data also show that the average interchange fee received by exempt issuers (credit unions and small banks) declined by $0.02 or around 5 percent, after the rule took effect, declining from $0.45 over the first three quarters of 2011 to $0.43 in the fourth quarter of 2011 (parentheses added).

The GAO Report continues:

…(C)oncerns remain about the potential for their (credit unions and community banks) interchange fees or fee income to decline over the long term (parenthesis added).

In addition, the FTC’s report does not acknowledge that the full impact of Section 1075 will not be known for some time, given the complexities of debit interchange. The data provided by the Federal Reserve Board was preliminary, from just the first quarter after implementation of the debit interchange regulation and the GAO report, which includes some more recent information, presents data that is much less granular than the Federal Reserve Board’s review.

An even more critical concern is that no federal government study, including the FTC’s, has addressed the impact of the implementation of the routing and exclusivity provisions in Section 1075, which took effect April 2012. Such an assessment is necessary for determining the extent of the impact of Section 1075 on credit unions.

Prior to the completion of the FTC report, CUNA shared with the agency information from our recent “CUNA Debit Interchange Survey,” which collected data on credit unions’ debit interchange volume and revenue from the last quarter of 2010 through the third quarter of 2012. The survey shows that since the implementation of the routing and exclusivity provisions of Section 1075, PIN debit interchange rates and volume have declined.

The agency’s report should have noted that additional data reflects recent declines in interchange fee income, particularly for PIN transactions. Also, it should have acknowledged that it is very early in the implementation of Section 1075 and that further data, as the Federal Reserve Board intends to provide on an annual basis, is needed to present a balanced assessment of the impact of Section 1075 on credit unions and small banks.

The impact of Section 1075 is a very important issue for credit unions and their members. Congress intended for credit unions and small banks to be exempt from the impact of the regulation of debit interchange fees, not just from the wording of key provisions of the rule. In order to ensure that outcome, it is imperative that agencies such as the FTC are as accurate as possible in reporting on debit interchange fees. I would welcome the opportunity to talk with you further about our concerns.

Best regards,
Bill Cheney
President & CEO
Credit Union Natl. Assn. (CUNA)
Washington, DC

# # #

About CUNA

With its network of affiliated state credit union leagues, Credit Union National Association (CUNA) serves America's 6,900 state and federally chartered credit unions, which are owned by more than 96 million consumer members. Credit unions are not-for-profit cooperatives providing affordable financial services to people from all walks of life. For more information about CUNA, visit www.cuna.org or follow @CUNA on Twitter. For more information about credit unions, visit www.aSmarterChoice.org and follow @asmarterchoice on Twitter.

TOP
150x172_Home Depot Data Breach SurveyUnite for Good Share your Stories100 Million CU Memberships