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CU concerns re interchange rule get press airing
WASHINGTON (1/21/11)--During a national press call Thursday, Jim Blake, president/CEO of HarborOne CU, reiterated the credit union call to scrap the Federal Reserve Board’s plan to implement government restrictions on interchange fees. The Massachusetts credit union CEO underscored that the practical ramifications for consumers of the plan to limit interchange fees could be numerous and dire. The press teleconference was organized by the Electronic Payments Coalition (EPC). The Credit Union National Association is an EPC member, and tapped Blake to give the credit union perspective. Blake said that already, even before any implementation rule has been finalized, there is broad talk about the possibility that interchange fee limits could drive up consumers’ check costs, eliminate some card rewards programs, force limits on the number of card swipes allowed per month--or a lower limit on what size charges can be applied to debit cards. The Fed plan, which seeks to implement provisions enacted by the Dodd-Frank financial regulatory reform package, offers a dual framework for determining what the law calls "reasonable" interchange fees. One plan would provide issuers with a safe harbor of seven cents per transaction, and set a maximum interchange fee cap of 12 cents per transaction. An alternative framework would simply cap the maximum interchange fee at 12 cents per transaction. These safe harbors and/or caps would be reevaluated by the Fed every two years. CUNA has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. Under the Dodd-Frank Act, card issuers with under $10 billion in assets would be exempt from the proposed rule changes. The exemption covers most, but not all, credit unions. However, CUNA remains concerned that a two-tiered pricing system could lead merchants to set incentives for consumers to use only big-issuers’ cards, which would have a lower per transaction cost for the merchant. In a related story, Bloomberg News reported Thursday that Rep. Barney Frank (D-Mass.) said he was ready to work with House Republicans, now in the majority, to force changes in the Fed’s interchange fee proposal. Frank, along with former Sen. Christopher Dodd (D-Conn.), were, of course the key architects of the Dodd-Frank Wall Street reform bill requiring the Fed to set the fee limits. The Fed is accepting public comment on its proposal until Feb. 22, and the agency has said that it is unlikely that a final plan would be ready by April. CUNA is asking credit unions to send their comments to the association by Feb. 1. Use the resource link to view CUNA’s Comment Call.


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