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BoA debit fee shows interchange cap a blow to consumers CUNA
WASHINGTON (9/30/11)--As most credit unions continue to offer free debit card services, banks are just beginning to apply sometimes hefty fees to the popular service. It was widely reported Thursday that Bank of America has plans to begin charging a $5 monthly fee to some debit-card users—-in an attempt to recoup lost revenues caused by the implementation of a statutory cap on debit interchange fees. The fee cap, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, set a limit of 21 cents for debit card fees and allows an additional five basis points of the value of the transaction to cover fraud losses. The law, however, does not apply to most credit unions because of an exemption for card issuers with assets of less than $10 billion. The Credit Union National Association (CUNA) and other financial trade groups waged a heated battle trying to get the U.S. Congress to “stop, study, and start over” on the interchange cap that CUNA argued was hastily added to the large financial reform bill without adequate study of its consequences. Merchants claimed consumers would benefit from lower prices if interchange fees were capped but balked at having any provisions in the bill that would require them to share any savings with their customers. No such provision was added. CUNA and the other financial groups warned lawmakers that without such a requirement, the fee cap was anti-consumer as it would force debit card issuers to charge a monthly fee for what had almost universally been a free service--one very popular with consumers without requiring an offset from the merchants. “This is precisely what we warned would happen,” Ryan Donovan, CUNA senior vice president of legislative affairs, said Thursday. “As the interchange regulation goes into effect, it is quite possible that others will follow suit and set fees.” Donovan said that throughout the legislative and regulatory process proponents of the interchange fee cap claimed consumers not only would not be harmed by the debit interchange law, they would benefit from it. “It should be clear to everyone now that the debit interchange law adversely impacts consumers,” Donovan said. “The silver lining, to the extent that there is any, is that the new fees imposed by Bank of America and others could prompt more consumers to join credit unions for lower rates and better service,” Donovan said. In fact, a USA Today article published earlier this week said the gap between the historically low rates credit unions offer their members and the higher rates big banks charge their customers could become even wider as a result of the new debit interchange fee cap regulations. (News Now 9/29/11). CUNA continues to pursue all avenues to assure the creation of a two-tier interchange systems to preserve credit unions’ debit card interchange fee revenue.


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