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Def Jam exec advocate for unbanked opposes interchange language
WASHINGTON (6/8/10)—Adding to the growing concert of opposition against government limits on interchange fees, Russell Simmons, co-founder of the hip-hop label Def Jam, voiced his concerns about the issue on behalf of 80 million “underbanked” Americans “who are left out of the banking system.” He cited the recent joint letter from Credit Union National Association (CUNA) and the Independent Community Bankers of American (ICBA) on the inadequacy of a carve out for smaller institutions as an influence on his decision to speak out. Simmons, based in New York, publicized, via The Huffington Post Monday, a letter he recently sent to Sen. Richard Durbin (D-Ill). Simmons’ letter said he is “gravely concerned about the potential unintended consequences” of an amendment, designed by Durbin, that would require the Federal Reserve Board to intervene in setting interchange fees. Describing himself as a long-time advocate for the poor and a business owner of a debit-card service for the under-banked, Simmons said his mission has been to provide needed access to debit cards with “transparent low pricing and services that help our users budget, build credit, buy affordable healthcare and participate in the U.S. economy,” something he said many can take for granted. The Def Jam founder said he has no stake or interest in the “politics of regulating large banks, or the various lobbying efforts on their behalf, or on behalf of large retailers who want to see interchange fees reduced.” But, he added, his is extremely concerned about the impact the interchange provision could have on credit unions, community banks, and “specialist providers to the under-banked,” and their ability to provide card services at affordable rates. “That in turn would hurt the poor and the underserved by either raising fees or limiting the availability of this vital service. This would have a grotesquely unfair impact on the most vulnerable and the most heavily hit consumers, including minorities,” Simmons said, and vowed, “I would be compelled to fight this publicly and actively.” Simmons noted the recent CUNA-ICBA letter and said he was alarmed by the groups’ arguments that a carve-out provision in the amendment for financial institutions with less than $10 billion in assets would not work for a number of reasons. One reason cited is that card issuers may not have the ability, or willingness, to make a distinction between institutions in processing payments and sharing interchange revenue. Simmons letter comes as the U.S. House and Senate prepare to negotiate a final financial regulatory reform bill, which many reports say could be ready for President Obama’s signature by July 4. The Senate bill contains language that would allow the government to limit interchange fees, while the House version is silent on the topic. The language was added as a late amendment and was never vetted through the congressional hearing process. CUNA has launched a massive grassroots campaign to try to convince lawmakers not to include the language in a final bill. More than 209,000 communications have been sent to federal lawmakers by credit union advocates, and hundreds of credit union representatives are expected to make personal visits to lawmakers on June 9-10.
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