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CU System
CEOs letter to editor discusses interchange issue
CARTERET, N.J. (8/6/09)--A credit union CEO's letter to the editor of a New Jersey newspaper outlines why credit unions oppose changes that would allow merchants to renegotiate changes in interchange fees with financial institutions. In the letter, published Wednesday in GMNews.com, MidState FCU President/CEO Tracy Sussman responded to an earlier letter on the fees. MidState FCU is a $16 million asset credit union based in Carteret, N.J. "If merchants have their way and succeed in changing the current terms of interchange fees, we may no longer be able to provide this convenience (credit and debit cards) for our members. Interchange fees cover the costs associated with credit and debit cards--things like delinquent payments, fraud, and those who just plain default on their credit cards," Sussman wrote. She noted that the credit union assumes the risk so merchants can accept credit cards. Merchants get paid quickly--often the same day--while the credit union must wait up to 30 days to be paid for the same transaction. "Interchange fees are just part of the cost of doing business, much like postage and advertising, and they are certainly less costly than returned check charges. What the merchants aren't saying is that the change in the current structure will not benefit the consumer, but will benefit merchants." She noted the driving force behind the merchants are big box stores, not local "mom and pop" shops. "While it is true the merchants are paying more in interchange, it is not due to raised fees, but simply volume," said Sussman. Two bills in Congress on the issue have not seen action. H.R. 2695, the "Credit Card Fair Fee Act of 2009" offered by Reps. John Conyers Jr. (D-Mich.) and Bill Shuster (R-Pa.), would permit merchants to negotiate fees with financial institutions via an antitrust exemption. Another bill, S. 1212, The Credit Card Fair Fee Act introduced in June by Sen. Richard Durbin (D-Ill.), would establish a panel of three Electronic Payment System judges to intervene in fee disputes between card service providers and merchants using the system. The Credit Union National Association (CUNA) is monitoring progress of the bills. CUNA opposes legislation that would affect interchange fees because it believes such action would adversely limit consumer options, competition and technological innovation. CUNA says that interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. Discussions regarding what value should be placed on the use of electronic payments should be within the purview of the industry participants. CUNA has also recommended that legislators wait for the results of a Government Accountability Office review of interchange fees before acting on any interchange legislation. To review the letter to the editor, use the link.
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