WASHINGTON (6/9/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney said Wednesday that the U.S. Senate's failure to delay implementation of the Federal Reserve's debit card interchange fee cap is deeply disappointing and CUNA and credit unions will continue pressing the Federal Reserve to improve the proposed rule to minimize negative effects on credit unions and their members. In fact, promptly after the Senate vote, CUNA sent a letter to all Fed governors to reiterate several recommendations that could help insulate small issuers from the negative impact on their income that many fear will be the result of the Fed’s current proposal. Among the actions Cheney suggested:
* Establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established and then report annually on how such a two-tiered system is working, and also provide that information to Congress; * Include all allowable and reasonable costs in setting the cap on interchange fees; and * Revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers. (See resource link for full letter)
CUNA is also involved in litigation to challenge the law and rule in an endeavor to preserve the revenue credit unions need to offer debit card services. CUNA filed an amicus brief in the suit against the interchange provisions brought by TCF Financial. The Fed's proposed interchange regulations, which now seem to be on track for at least the fee cap provisions to go into effect July 21, would limit debit card transaction fees to as little as 12 cents per transaction, if adopted as proposed. The Fed has acknowledged there are costs it could include but did not in the proposal. An exemption for issuers with under $10 billion in assets is include in the statue and acknowledged in the Fed proposal, but CUNA, the leagues and credit unions emphasize that the exemption is flawed and will not work in practice if it is not subject to enforcement by the Fed. Fed Chairman Ben Bernanke, FDIC Chairman Sheila Bair, National Credit Union Administration Chairman Debbie Matz, and other regulators have also said they are not sure that the exemption would work as planned. In the Senate vote yesterday, credit unions won the majority of votes when the Senate weighed in on an amendment--54 in favor and 45 against--to effect a delay and require an impact study of the interchange cap and the small-issuer exemption. However, to pass the amendment needed a total of 60 votes in favor. CUNA has worked intently for months on the legislative and regulatory fronts in an effort to improve the interchange rules, make the exemption for smaller institutions truly effective, and prevent credit unions and their members from being hurt by these measures, CUNA’s Cheney said. He commended Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), sponsors of the amendment to delay the interchange cap, for their work on behalf of credit unions. The Senate "missed a huge opportunity to get this right," and credit unions are "deeply disappointed the Senate disregarded the more than half a million contacts made by credit unions and their members over the last three months in failing to pass the Tester-Corker amendment," Cheney added. Cheney said that CUNA has made it clear that these cap rules "will impose a severe hardship on credit unions with debit card programs, draining the revenue they need to offset the costs of providing card services.” He added, "much as they would prefer not to, credit unions will have no recourse but to make up these costs by imposing new fees or service restrictions on their members. How are consumers better off under this scenario? The plain fact is they are not."