Although credit unions would have preferred no debit interchange rule, the Federal Reserve Board’s final rule contains important improvements from the original proposal, says CUNA President/CEO Bill Cheney. And CUNA will continue to seek further improvements.
During a conference call Thursday, Cheney lauded the “tireless efforts” of credit unions, leagues, and CUNA for helping to achieve these improvements, including the higher cap for issuers with $10 billion or more in assets. This cap increased from 12 cents per transaction to 21 cents, plus five basis points (bp) of the transaction’s value to accommodate fraud losses.
“The Fed clearly listened to credit unions about the proposed rule,” Cheney says. “For the first time, the Fed referred to the 11,000 comment letters on the proposal—half of which came from credit unions. The Fed specifically mentioned concerns for credit unions and other small issuers.”
Although the “stop, study, start over” campaign fell short, the Senate’s 54 to 45 vote in favor of the measure sent a clear message to the Fed about the effectiveness of the two-tier system. “You convinced a majority of the Senate to vote with us,” Cheney notes.
CUNA’s focus now turns to working with the Fed and congressional leaders to enforce the exemption for small issuers.
“It’s anyone’s guess how this exemption will work,” says Bill Hampel, CUNA’s chief economist/senior vice president of research and policy analysis. But the new rule is a “big improvement” for credit unions.
The effect of the cap on credit union net income will be 7 bp or less, Hampel say. Under the original proposal, credit unions could have taken a 22 bp hit to their net income.
Hampel believes large issuers likely will raise card fees substantially to recoup lost debit interchange fee income.
Not everyone was happy with the Fed’s “improvements”—namely retailers, says John Magill, CUNA’s senior vice president of legislative affairs.
“The National Association of Convenience stores is livid over this result,” he says. “They said the Fed caved to special interests. Well, we think America’s 92 million credit union members are pretty special.”
“This is as much as we could have hoped for,” Cheney adds. “We’ll do everything in our power to make it work.”
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