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CU rep tells Fed panel of interchange concern
WASHINGTON (3/11/11)-- Mike Long, a member of the Federal Reserve Board’s Consumer Advisory Council (CAC) and executive vice president/chief credit officer of UW CU, in Madison, reiterated credit union concerns with the Fed’s interchange fee proposal Thursday at a CAC meeting. Long is a member of the Credit Union National Association’s (CUNA) Consumer Protection Subcommittee and a member of the Executive Committee of the CUNA Lending Council. His comments involved the Fed’s implementation plan for a statutory cap on debit card interchange fees. Credit unions under $10 billion in assets are exempt from the proposed rule, but CUNA has voiced concerns that the exemption will not work in practice. Long reminded the Fed advisory panel that UW CU, like all credit unions, is a not-for-profit cooperative and that a need to impose a fee on currently free checking accounts may be necessary to recoup the revenue UW CU will likely lose if the Federal Reserve finalizes its proposed debit interchange regulation. He underscored that increased fees by credit unions would only be to cover the cost of operating checking accounts that are currently paid for through debit card interchange income, and not from greed, as some have charged of banks. Long said his credit union falls below the $10 billion threshold, but added the exemption will not likely work in practice. He said the Fed’s rule, that sets a seven to 12 cent fee limit for large issuers and could, de facto, do the same for his credit union, could reduce his credit union’s net income by 87% in 2012. Long urged the Fed to study the full impact of its regulation before moving to a final rule. Currently, the Fed rule is expected to go into effect in July. CUNA has asked the U.S. Congress to instruct the Fed to “slow down, study, and start over” on its implementation plan. CUNA is concerned that while the law requires the Fed to set a debit card interchange fee that is “reasonable and proportionate,” the Fed plan does not consider all costs associated with providing the service.


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