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CUs legislators alike wary of interchange changes
WASHINGTON (2/24/11)—By the time the Federal Reserve’s comment period for its interchange fee regulation proposal closed on Feb. 22, over 5,200 credit unions and credit union backers had contacted the Fed via the Credit Union Nation Association’s Operation Comment to express their concerns with the proposal. The Fed's interchange provisions, which were released for public comment late last year, would cap debit card interchange fees that are paid by merchants to large debit card issuers at no more than twelve cents per transaction. By law, issuers with under $10 billion in assets are entitled to be exempted from the interchange fee rate setting provisions. Credit union comments on the interchange proposal included criticisms of the proposal’s arbitrary cap, which many said does not fully account for the costs of running debit card programs. One respondent said that his credit union would be forced to increase some fees, eliminate certain products and services, and could go so far as cutting staff members or closing down branches. These drastic actions would reduce the level of service provided to members and could prevent some current credit union members from having access to the banking system in general, the letter adds. Legislators, including Sen. Claire McCaskill (D-Mo.), commented on the interchange proposal when it was first released late last year. The most recent comments from members of Congress came in a Tuesday letter from Sens. Charles Grassley (R-Iowa) and Tom Harkin (D-Iowa). In that letter, Grassley and Harkin, both of whom supported Sen. Richard Durbin’s (D-Ill.) interchange proposal when it was added to the Dodd-Frank Act last year, encouraged the Fed to ensure that the small institution exemption works as intended. House Financial Services Chair Spencer Bachus (R-Ala.), Senate Banking Committee ranking minority member Richard Shelby (R-Ala.) , Rep. Barney Frank (D-Mass.) and other legislators have also expressed concern over the potential issues that the interchange changes could cause small issuers. Fed Chairman Ben Bernanke in testimony submitted last week said that he could not ensure that the planned small issuer exemption would work as planned. Several legislators during a pair of recent House and Senate hearings said that the interchange regulations, which would come into effect in July, should be delayed to allow for further consideration. CUNA this week suggested that the Fed should work with Congress to delay interchange regulation implementation by up to 24 months to allow more time for discussion and consideration of how the interchange regulations would impact credit unions. (See related Feb. 23 story: CUNA: Two-year delay needed for interchange study)


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