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FDIC Chair Interchange exemption needs to be fixed
WASHINGTON (3/7/11)—A plan that would exempt credit unions and other financial institutions from the Federal Reserve’s planned interchange fee regulation changes would not work in practice, and “needs to be fixed,” Federal Deposit Insurance Corporation Chairman Sheila Bair said in a recent television appearance. Bair appeared on the March 3 edition of CNBC’s The Kudlow Report . When questioned by Kudlow, Bair said that she “would be fine” with allowing the market to determine the amount of interchange fees. Bair added that it makes her nervous “when the government tries to start doing rate regulation and charging fees.” The FDIC Chair added that there appears to be “a movement afoot” to delay interchange implementation. Bair in testimony delivered before the Senate Banking Committee last month speculated that the interchange changes could harm small financial institutions far more than they would help merchants, and a number of regulators and legislators have also noted that the proposed $10 billion exemption is likely to be impotent to protect small issuers. Credit Union National Association President/CEO Bill Cheney last week called for the Fed to stop, study and start over on interchange fee regulations and encouraged members of Congress to strike a legislative remedy that will ensure a meaningful interchange fee carve-out. (See related March 3 story: Cheney warns reg burden is growing ‘crisis’) Rep. Debbie Wasserman Schultz (D-Fla.) repeated the call for delay during CUNA’s recently completed 2011 Governmental Affairs Conference, and said that she would work with any legislator that aimed to halt the progress of the interchange fee regulation changes. (See related March 3 story: Wasserman Schultz: CUs can halt interchange train) The interchange fee regulations, which could limit the amount of interchange fees charged per purchase to as little as 7 cents, are currently set to come into effect in July. For video of Bair’s appearance, use the resource link.
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