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CUNA to Fed Changes welcome but concern remains on interchange
WASHINGTON (7/11/11)--While the Federal Reserve addressed some credit union concerns when it released its final debit interchange cap rule last month, the Credit Union National Association (CUNA) has noted that the debit interchange cap plan remains “bad law and poor public policy.” CUNA, in a letter to Fed Chairman Ben Bernanke, each Fed governor, and other regulators, added that the Fed rule’s impact on credit unions will not truly be known “until the regulation has been implemented for a number of months.” CUNA has “encouraged Congress to continue a watchful eye on the implementation process,” and “would like to work with the Board in its ongoing efforts to monitor the impact of the interchange rule,” the letter added. “Credit unions that offer debit cards to their members are anxious about the potential loss of debit interchange income as well as the impact of the routing and exclusivity provisions on their debit card programs,” Cheney said. The Fed's final interchange rule would cap large issuer debit interchange fees at 21 cents. This cap is intended to cover costs related to network connectivity, hardware, software and labor, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. Under a separate rule, debit card issuers would be permitted to charge an additional penny per transaction if they are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets, prepaid cards, and government-issued cards are exempt from the cap provisions. The final rule also prohibits issuers and payment card networks from limiting merchants' ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. The Fed will be required to report on the interchange cap's impact on small-issuer interchange fee income and whether merchants are discriminating against small issuers that are still able to charge more for debit card purchases. For the full CUNA letter, use the resource link.


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