WASHINGTON (2/4/11)—Credit Union National Association (CUNA) President/CEO Bill Cheney during a Thursday appearance on Bloomberg Radio’s Taking Stock with Pimm Fox
urged the Federal Reserve to stop and study the new Interchange law, rather than forging ahead with new rules, so that everybody wins -- consumers, merchants and financial institutions.
The Fed should be given the time needed to consider all interchange related costs, and set a reasonable interchange rate to avoid “unintended consequences," Cheney said. These unintended consequences could include the elimination of debit card programs by credit unions or the addition of new fees that would be imposed on credit union members in order to keep the programs. The Federal Reserve’s interchange proposal would place an arbitrary cap, perhaps as low as 7 cents, on interchange fees. Cheney challenged retailer claims that any savings gained from this interchange fee cap would be passed on to consumers. The promise and progress of credit union member business lending legislation was also addressed during Cheney’s Thursday appearance. Prompted by one show host’s observation that big banks have recently been reluctant to lend to small businesses, Cheney noted that credit unions are waiting to do more to help the economy, and could do so if the cap is raised. Cheney also confirmed one host’s suspicions that fear of competition is the sole motive behind banker opposition to the MBL cap lift. The hosts noted Federal Reserve Chairman Ben Bernanke’s Thursday statement that more jobs would be needed if the economic recovery is to be sustained, and Cheney said that that employment gap could also be filled once the MBL increase is passed into law. Lifting the MBL cap to 27.5% of total assets would create over 108,000 new jobs, Cheney said. CUNA has estimated that the MBL cap increase would add $10 billion in new funds into the market, at no cost to taxpayers. CUNA and credit unions made significant inroads with their 2010 support of MBL legislation in both the House and Senate, and Cheney said that they are “not going to start at the beginning” whenever MBL legislation returns to the House and Senate floors. “We’re going to get it done,” he said. Cheney also took on the credit union tax exemption and credit union chartering issues during the half hour interview. Cheney said that while he is naturally in favor of more credit unions, the current restrictions on the raising of supplemental capital can make it difficult to gather the funds needed to organize and start a new credit union.