INTERCHANGE
Issue: Your Credit Union Debit Card
Background: Last week the US Senate approved the Financial Regulatory Reform Bill. While the overall bill takes a balanced approach, there is one provision of great concern to credit union members like you. In the debate process, the bill was amended to direct the Federal Reserve Board to limit fees that merchants pay when customers pay with debit cards. The interchange amendment, which did not receive a thorough review, does not belong in this bill and will have unintended consequences for credit union members. The House also passed a financial reform bill in December 2009 and the two chambers will reconcile the differing bills by a conference committee.
Credit Union Member Concerns: The Senate-passed interchange provision reduces merchants’ financial responsibility for the benefits received from the card payment system. Merchants receive tremendous benefits when they choose to accept debit and credit cards as a form of payment. They are paid immediately, and they do not have to deal with cash or wait for a check to clear. Like electricity or rent, the interchange fee that the merchant pays is a cost of doing business. Government rate controls on interchange reduce the merchants’ responsibility to pay for the benefits received from the card payment system and will drive up costs for this credit union and our members.
This credit union incurs significant expenses in operating our card payment system. For example, we are responsible for administration, customer call centers, and reissuing cards in cases of merchant fraud. Interchange supports these costs. If interchange fees were reduced, this credit union and other small financial institutions would be forced to raise rates and fees for card services, or even curtail debit and credit card services for members. Furthermore, there is no evidence to suggest that merchants would pass along any savings resulting from lower interchange to consumers.
The interchange provision of the Senate bill offers no real “exemption” or “carve-out” for credit unions; if it were included, merchants and big banks would set rates that would make it impossible for this credit union to compete. In the end, merchants could refuse to accept the credit union debit card you rely on for everyday use!
ACTION Needed: Please send a message to your federal legislators today urging them to oppose inclusion of the Senate-passed interchange provision in the financial reform bill. A prewritten letter is available for your use at the Credit Union Grassroots Action Center, where you can personalize and send an email or print and fax a letter. (This message will be directed to the appropriate legislators based on the address you enter.) Please follow up your email by calling your legislators’ offices.
Make sure your voice is counted! If you do not utilize CapWiz, please be sure to send your league representative a copy of your letter.
Thank you for your participation in this important Action Alert.
