Open up your calendars. Flip ahead to late July, and circle two quickly approaching dates: July 21 and July 27. Here’s what’s happening:
July 21. The Federal Reserve’s debit interchange rules go into effect. The subject of a tense, bitter, and long legislative and legal battle (one that continues at press time), the law caps the amount financial institutions may collect, per transaction, in debit interchange fees.
Notwithstanding what we think will be an ineffective “carve out” for most credit unions, going forward if proposed rules stand, fees will be capped at no more than 12 cents for each transaction. The law obligates the Fed to set the cap based on “reasonable costs.” Unfortunately, the Fed failed to include all costs, such as those related to fraud prevention and data security, both of which Congress specifically directed the regulator to consider. And the law specifically prohibited the Fed from including actual fraud costs.
Moreover, the Fed had very little time to develop rules—and credit unions have had even less time to study and adapt operations to reflect the new rules. Congress mandated the Fed adopt final rules by April 21, and they would be effective July 21. CUNA and credit unions along with other financial institutions argued for more time—up to 24 months—to properly prepare.
The Fed balked at meeting the April 21 deadline for final rules. In fact, as I write this article, it’s missed the deadline and still hasn’t issued the final rule. But the rules still must be issued before the July 21 effective date. And now credit unions have even less time to adapt to the rules.
That’s one reason we support legislation to delay the July 21 effective date. “Stop, study, and start over” has been our mantra since March 15. That’s when Sen. Jon Tester, D-Mont., and Rep. Shelley Moore Capito, R-W.V., introduced bills to stop the interchange law, study its effect on credit unions and other financials—and, we hope, start over on debit interchange legislation.
We’re still waiting to see what will happen—a delay in the law, or compliance by July 21.
July 21. The Consumer Financial Protection Bureau (CFPB) goes “live.” CFPB will have direct supervision over financial institutions with $10 billion or more in assets (this includes three credit unions). But CFPB will have an impact on all financial institutions, particularly since it will be issuing most financial consumer protection rules.
Credit unions are hardly in need of a regulator to ensure “consumer protection.” After all, we are the original protectors of consumer interests in financial products. Nor do we need any additional regulatory burden. That has been our mantra regarding CFPB.
Prof. Elizabeth Warren, organizer of the agency, has actively reached out and told us CFPB has little interest in dumping more regulation on credit unions. One credit union leader who was listening to a recent Warren speech remarked later he was “cynically optimistic” that the new agency wouldn’t pile on new rules. We will continue to work with Prof. Warren and other CFPB leaders to help ensure they address credit union interests, and acknowledge the credit union difference.
After July 21, we’ll begin to understand if optimism, or cynicism, is in order.
* July 27.NCUA’s financial literacy requirements for federal credit union directors begin. NCUA says credit union directors in office prior to or on Jan. 27, 2011, “must have the ability to read and understand the credit union’s balance sheet and income statement.”
New directors (those elected or appointed after this date) must have, or gain, an understanding of basic finance and accounting principles within six months after election or appointment. CUNA and the leagues have multiple training opportunities available for directors to obtain the proper training before next month’s date and beyond.
During CUNA’s America’s Credit Union Conference & Expo, June 19-22 in San Antonio, attendees can learn more about how to prepare for these critical events.
So, circle these dates with highlighters or set your smartphone calendar alarms. And keep in touch with CUNA and your league for the latest news.
BILL CHENEY is CUNA’s president/CEO.