An Issue That Unites and Infuriates

Interchange is a troublesome challenge for CUs.

March 8, 2011

We sometimes hear that credit unions have a challenging time agreeing on the movement’s “most important” issue. That shouldn’t be a surprise. We have a very diverse movement.

But, outside of preserving credit unions’ tax-exempt status (which just about everybody “gets”), interchange has become the issue that both unites and infuriates credit unions almost more than anything else—at least since the 1998 Campaign for Consumer Choice to preserve credit unions’ ability to add small employee groups to their memberships.

Interchange is a money issue. It affects credit unions and their members directly in their pocketbooks. Coupled with the additional weight of insurance fund assessments and crimped revenue due to the economic slowdown—and memberships unwilling to take on more debt and reluctant to pay more fees—the impact of the issue is magnified considerably.

We had expected to be dealing with more industry-specific issues, such as supplemental capital and member business loans. These remain our top legislative priorities.

But the interchange issue persists. It’s a real and troublesome challenge for credit unions. And we must address it as we pursue our other priorities.

Here’s what we’re doing:

* Urging Congress to take another look at the interchange provision and its impact on smaller institutions such as credit unions. (We were the first to call on Congress to do so. Congress responded affirmatively by scheduling a House Financial Institutions Subcommittee hearing last month). We’re pushing for a Senate hearing on the issue as well. Short of outright repeal of the provision, we’re hoping that congressional action will require the Federal Reserve to delay its rule until there’s a comprehensive review of the law’s impact on smaller institutions.

* Facilitating comment letters to the Fed. At press time, more than 4,000 letters had been sent to the Fed through CUNA’s online commenting tools. And we hear that more than two-thirds of the letters the Fed received were from credit unions.

Some have raised their eyebrows at our letter-writing approach, questioning whether the Fed would pay attention to so many letters. But credit union people are busy running their credit unions, and they gladly rely on the assistance we can give them to make their views known to the Fed. I can assure virtually all readers of this column that most credit unions offering debit card services to members—about 70% of credit unions overall—are very concerned about the new law and the Fed’s rules. (They must be finalized by April 21.) As proof, I have the letters, e-mails, phone message slips, and questions I’ve received from credit union leaders I’ve met at public events.

* Meeting with senior Fed officials to explain the real impact of the interchange provision on credit unions of all sizes, regardless of the $10 billion “carve out.”

* Collaborating with the Electronics Payments Coalition—the financial services industry group made up of credit union, bank, and debit card processor groups—to make our case with Congress, the regulator, and the public that the new law and regulations could mean some real problems for consumers.

* Working with the press across the nation so that it understands the harm the interchange provision can have on credit unions’ ability to keep offering affordable financial services to members, especially those who can least afford to pay anything extra for those services.

* Explaining to consumer and other interested groups the issues and costs that credit union members might face as a result of the new law and rules, such as fees or discontinuing debit programs.

None of this comes at the expense of our work for credit unions to secure supplemental capital, expand their business lending authority, or reduce their regulatory burden. Because all of these issues, including interchange, are of high importance to credit unions, we’ll pursue them for no other reason.

BILL CHENEY is president/CEO of the Credit Union National Association.