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CUNA brings real life interchange stories to the Fed

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WASHINGTON (6/6/11)—Recommendations to improve the Federal Reserve Board’s debit interchange regulation was the subject of a meeting Friday of Credit Union National Association (CUNA) representatives with Fed General Counsel Scott Alvarez. This is the second session that CUNA had has with Alvarez on interchange issues. Jane Watkins, CEO of Richmond, Va.-based Virginia CU and Tom Dorety, president/CEO, Suncoast Schools FCU, Tampa, Fla. , relayed to Alvarez how the loss of interchange income that would result from the Fed’s proposed fee cap would impact their credit unions, their members and their communities. A Fed plan would set the cap at seven to 12 cents for issuers with more than $10 billion in assets. Watkins told News Now, “We described who our members are -- what they are like. For instance most (Virginia CU) members are dual wage-earning families with a combined income of about $50,000 a year, max.” She said imposing a fee on these members to make up the lost interchange income, as some credit unions may have to do, would pack a wallop. She said such a fee is not in her credit union’s plans. “A five-dollar fee for checking really has an impact on these families. In the current environment, capital is precious for our members.” Dorety said he represented sand state credit unions and their members, referring to the geographic areas acknowledged to be hardest hit by the country’s economic problems, specifically the housing crisis. He noted that conditions for his members are just starting to improve, and it would be a devastating time to hit them with a new fee. Dorety, too, called free checking a “mainstay” for his members, and said it is a main selling point that has helped his credit union increase its member base. That would be harmed by the interchange changes. The Fed’s fee cap would also reduce funding to his credit union’s charitable activities. The credit union is one of the top financial supporters of public schools in the counties it serves through it interchange income. Also at the meeting, CUNA Deputy General Counsel Mary Dunn focused on changes CUNA is urging the Fed to make in its proposal. Among the recommendations she urged were:
* Specific provisions on how the statutory exemption from the cap for debit card issuers with less than $10 billion in assets can be made to work; and * Raising the interchange ceiling for large issuers by including all allowable costs.
If the Fed is not legally able to exempt small issuers from the routing and exclusivity provisions, substantially delaying their effective date. Dunn also followed up on a letter sent by CUNA on May 2 to Fed Chairman Ben Bernanke on routing and exclusivity provisions included in the new interchange rules enacted in last year’s Dodd-Frank Wall Street Reform Act. While the interchange provisions regarding fees are required to take effect July 21 unless Congress approves a delay, the statute only requires the Fed to write rules on the exclusivity and routing provisions by July 21. It does not provide a specific effective date for the routing and exclusivity provisions. Dunn urged Alvarez that if the Fed board is not legally able to exempt small issuers from the routing and exclusivity provisions, the agency should substantially delay their effective date. CUNA has emphasized during the meeting that Congress focused on debit card costs for large issuers in the interchange statute, but wanted to protect debit card fee income for small issuers.