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CUNA Interchange not just a big bank issue
WASHINGTON (5/13/10)--In a Wednesday letter, the Independent Community Bankers of America (ICBA) joined the Credit Union National Association (CUNA) to oppose an interchange amendment that would “do nothing but increase costs and reduce choice for Main Street consumers and their local financial institutions.” Sen. Richard Durbin’s (D-Ill.) latest amendment is a combination of two earlier amendments, and would “have the government regulate interchange rates so big-box merchants can increase their profits by getting all of the benefits of debit acceptance for next to nothing, while simultaneously eroding the rules that force merchants to be fair to consumers.” Durbin introduced two amendments recently, one of which would have permitted merchants to set a minimum or maximum transaction amount for payment by card; offer discounts for use of cash, check, debit card or stored-value card; and offer discounts to customers to use a competing card network. A second amendment offered by Durbin would have directed the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, to assure that they are what the proposed language terms "reasonable and proportional" to the cost incurred in processing the transaction. The CUNA letter, which was sent to Senate leaders Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.), added that while the new amendment appears to impact only larger banks, offering a carveout for credit unions and community banks, the legislation still makes credit union debit cards “the most expensive for a merchant to accept--something the market will not tolerate for long.” “To make matters worse, nothing would stop Visa and MasterCard from simply applying the artificially lowered interchange rates across the board to all issuers, regardless of size, forcing many credit unions and community banks to re-evaluate their ability to offer debit cards,” the letter added. CUNA and the ICBA also noted that interchange “is not a ‘big bank’ issue.” “The fact is, interchange revenue--and the network rules supporting the electronic payments system--is vastly more important to small issuers, which rely on this income and structure to meet their customers’ and members’ needs and product expectations,” the letter added. For the full letter, use the resource link.

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