WASHINGTON (5/11/11)--An argument of the merchants in supporting the coming interchange limits is that they will not discriminate against those who hold debit cards from smaller financial institutions, but the Credit Union National Association (CUNA) and three other bank and credit union trade groups took issue with that claim in a letter yesterday to Rep. Shelley Moore Capito (R-W. Va.), author of the House bill to delay the interchange rules. The financial groups pointed to a news report last week where a prominent technology company boasted that it was developing new “steering services” for merchants to encourage the use of certain cards over others. “This report supports Federal Reserve Board Chairman Ben Bernanke’s testimony before the Senate Banking Committee that the small issuer exemption may not work in the marketplace,” said the letter, signed by CUNA, the American Bankers Association (ABA), the Independent Community Bankers Association of American (ICBAA), and the National Association of Federal Credit Unions (NAFCU). “It is remarkable that the same groups advocating for weakened network operating rules would now hide behind them in their defense of government price controls,” the four trade groups said of the merchants. “Merchants know that enforcing these rules among the millions in their ranks is impossible.” CUNA told Rep. Capito the merchants have no incentive to abide by network antifraud rules because they bear no liability for card fraud. Instead, they focus on verifying identity at the point of sale for checks, where they do have liability risk. The merchants’ disinterest in complying with network anti-fraud rules “gives us no confidence” they’ll comply with anti-discrimination rules designed to protect community bank and CU cardholders. “The merchants opposing your legislation would have Congress, community banks and credit unions rely on their ‘commitment’ that everything will work out fine in the end,” CUNA stated. “Unfortunately, we, and many market experts, do not believe this to be true.” CUNA, ABA, ICBA and NAFCU again called for prompt passage of the legislation to delay the interchange rules from taking effect July 21 to allow for further study of the potential negative effects. A copy of the letter also was sent to all House members and senators.