CUNA’s Interchange Push

Job one: Preserve as much fee income as possible.

June 24, 2011

As we go to press, Congress hasn’t yet decided whether to delay the July 21, 2011, effective date of the interchange debit card transaction fee rule. Neither has the Federal Reserve Board adopted its final regulation on such fees and related issues.

For the 70% of credit unions offering debit card programs to their members, the issue of the fees debit card issuers receive is a chief concern.

That’s why, in addition to working with credit unions and leagues to press Congress for the delay, CUNA has also urged and pushed the Fed in every way possible to make several changes to the interchange proposal before it was adopted in its final form.

There are many unknowns about the extent to which the interchange amendment in the Dodd-Frank Wall Street Reform and Consumer Protection Act will affect debit card programs, merchants, networks, and consumers.

The main concern since the development of the interchange amendment in Congress last year, however, was to preserve as much credit union debit card fee income as possible.

The main compliance issue—come July 21, 2011, when the interchange amendment takes effect if Congress doesn’t intervene—will likely be the requirement to prticipate in at least two independent payment networks.

While the Fed can’t delay the provisions limiting fees, it does have authority to postpone the network participation requirements, and we have urged the agency to do so.

In its ongoing meetings, letters, and communications to the Fed to protect credit unions, CUNA— coordinating with its Interchange Working Group—has focused on:

  • Urging policymakers to support the congressional delay;
  • Pushing for a meaningful exemption for small issuers (those with assets of $10 billion or less) that will actually protect them—as Congress intended—from the fee limits set by the Fed;
  • Pressing for higher fee limits for large issuers. This ultimately could benefit all issuers because the marketplace may drive debit interchange fees to the levels capped by the Fed; and
  • Advocating for relief from the provisions that grant merchants flexibility to route transactions and from requirements that all issuers participate in multiple independent networks.

CUNA also is participating in the legal challenge to the debit interchange fee regulation to ensure all avenues of relief are available to credit unions.

While improvements in the regulation of debit card interchange fees has been a priority at CUNA for more than a year, we continue to focus on a number of other concerns, and will continue these efforts for the foreseeable future.

Primary among those objectives is achieving a better regulatory environment for credit unions. There’s no doubt that the NCUA Board is on a mission to prove to the world that it can be tough—likely encouraged by some in Congress and the administration who don’t want a repeat of problems such as those with corporate credit unions.

But the examiner aggression many credit unions are experiencing is counterproductive. Further, consistent with the Federal Credit Union Act, credit union boards and managers must be allowed to exercise their own reasonable business judgment and take on risks appropriate for their activities and membership.

Congress wants consumers to have choices in the financial marketplace that include credit unions. CUNA has taken a number of steps to call attention to and address these regulatory concerns.

My next column will focus on CUNA’s growing efforts to ensure credit union officials have the latitude they need to operate their credit unions effectively—consistent with safety and soundness—and to ensure consumers will always have access to credit unions.

MARY MITCHELL DUNN is CUNA’s senior vice president/deputy general counsel. Contact her at 202-508-6736.