WASHINGTON (3/25/11)--The Credit Union National Association (CUNA) on Thursday said it is encouraged by Federal Reserve Chairman Ben Bernanke’s pledge to ensure that a planned interchange rule carveout for small issuers is effective, but CUNA also emphasized the continued need to press for legislation to delay implementation of the overall rule. CUNA said that the delay, as proposed by bills pending in both the U.S. House and Senate, is imperative because no one outside of the Fed knows what the agency is considering to make good on the chairman’s pledge. Under the terms of the carveout, credit unions and other financial institutions with under $10 billion in assets would be exempt from portions of the proposed interchange rules that would limit the amount of interchange fees charged to twelve cents per card transaction. Bernanke in a speech delivered this week said that the Fed would do everything it could to ensure that this proposed carveout would work as planned. Bernanke's remarks were made before the Independent Community Bank Association's annual meeting. Bernanke has said the Fed may miss the April 21 deadline set by the statute, noting that the agency will have to take as much time as needed to draft the rule appropriately (Bloomberg March 2). Meanwhile, Sen. Richard Durbin (D-Ill.), who authored the interchange legislation, continues to maintain the exemption will shield small credit unions and banks, saying so again during a Thursday press conference. Durbin also noted that he did not anticipate the political response that his interchange legislation has received. CUNA and credit unions have been emphasizing to legislators and the Fed that the small institution exemption has inherent flaws and is unlikely to work. “The likely ineffectiveness of the exemption and the inability to enforce a two-tiered system are concerns voiced by more than 5,000 letters from credit unions in comments to the Federal Reserve Board,” CUNA President/CEO Bill Cheney reminded Durbin in a letter last week. “Commenters also underscored the fatal flaw of not including all costs in determining the interchange rate,” Cheney noted. Additionally, Federal Deposit Insurance Corporation Chairman Sheila Bair last month told the Senate Banking Committee that the interchange changes could harm small financial institutions far more than they would help merchants. A number of regulators and legislators have also noted that the proposed $10 billion exemption is likely to be impotent to protect small issuers. Bair more recently has said that the planned interchange fee regulation changes would not work in practice and needed “to be fixed." CUNA has repeatedly said that to ensure that the planned exemption is effective, Congress should halt the progress of the interchange rule. If an agreement to delay implementation cannot be reached, CUNA has called on the Fed to do all it can to ensure that the proposed exemption works as Congress said it would. 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%. A final version of the interchange rule is scheduled for an April release, and would become effective in late July. Legislation that would delay the implementation of the interchange fee cap has been introduced in the Senate and House. The two bills would also order regulators to study the impact that the proposed interchange rules would have on credit unions, small issuers, consumers and merchants.