Legislation May Lead to Higher Fees

CUs have major concerns about the Fed's proposed interchange fee regulations.

February 27, 2011

The sluggish economy, probable loss of fee income due to the 2010 financial reform legislation, and corporate stabilization assessments continue to burden credit unions.

Contributing to the concern over the loss of fee income are proposed interchange fee regulations by the Federal Reserve.

The Fed’s proposal is expected to reduce the amount of check card interchange income credit unions earn, as well as negatively affect members through changes to rates, fees, and services.

Credit unions will not only need to cover the loss of fee income, but also the increased costs of complying with the regulations.

While the fallout of interchange legislation will not be clear until the Fed releases final rules by its April 21 deadline, credit unions are considering what actions to take if the new regulations do indeed have a negative impact.

Most credit unions (91%) that offer check cards anticipate they will make some sort of changes to their rates, fees, and/or services as a result of interchange legislation, according to CUNA's 2010-2011 Credit Union Fees Survey Report.

The most common changes credit unions anticipate making: introduce or increase debit card/check card fees and increase nonsufficient funds/overdraft protection fees. About 40% cite each of these changes.

Plus, 30% of credit unions say they’ll eliminate free checking accounts—long a hallmark of credit union service to members.

Beyond these changes, many credit unions would have to lower deposit rates (25%) and/or increase nonmember ATM fees (21%) to cover costs. Only 9% of credit unions indicate they would make no changes.