GAO report backs opposition to interchange legislation, Mica says

WASHINGTON (11/20/09)--A U.S. Government Accountability Office (GAO) report on the impact of interchange fees, released on Thursday, "further underscores why Congress must protect the interests of consumers and oppose harmful interchange legislation," Credit Union National Association (CUNA) President/CEO Dan Mica said.

The report, entitled "Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges," found that merchants benefited from "increased sales, faster payments, and lower labor costs" related to card acceptance. "Accepting credit cards also allows merchants to make sales on credit at a generally lower cost than operating their own credit program," the GAO report added.

"Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult. Consumers also might face higher card-use costs if issuers raised other fees or interest rates to compensate," the GAO report found.

The report also "rightly pinpoints the fact that Interchange is a significant source of revenue for smaller issuers such as credit unions," Mica stated, adding that this revenue "allows credit unions to offer credit card programs to their consumer/members which are competitive with card programs offered by much larger institutions."

"In fact, those credit union programs have proven to be less expensive for our members than those offered by larger issuers," he said.

The GAO report also "recognizes that having small issuers in the market benefits consumers by forcing competition," Mica said. "Limiting or reducing Interchange would likewise limit competition – and our members would pay the price," he added.

The GAO, which was tasked with the interchange study following the passage of the 2009 Credit Card Accountability, Responsibility, and Disclosure Act, also found that while "some consumers have benefited from competition in the credit card market," those who do not use credit "may be paying higher prices for goods and services, as merchants pass on their increasing card acceptance costs to all of their customers."

CUNA and credit union leagues have combined forces to advocate against merchant-proposed changes to interchange by distributing over 300,000 postcards to be mailed to the Senate. Credit union leagues have also used CUNA's Hike the Hill program to communicate with Congressional representatives on interchange and other issues central to credit union success.

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