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Fed can delay some interchange provisions CUNA
WASHINGTON (5/3/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney Monday said the Federal Reserve Board has the authority to delay portions of pending statutory changes to debit card interchange rules, and he urged the Fed to use that authority. Cheney contacted Fed Chairman Ben Bernanke by letter. The letter was also sent to all other Fed board members and the agency's general counsel. Cheney called on the Fed to enact a delay of as long as 24 months on portions of the its interchange proposal that would address exclusivity arrangements and routing restrictions. Under requirements of the Dodd-Frank Wall Street Reform Act, the Fed has proposed a debit card interchange limit that would top such fees at 12 cents. The law intends to exempt credit unions and other small institutions with assets of $10 billion or less from fee cap. However, the effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. While rules that would set an artificial cap on the amount that large issuers may receive for each individual debit card transaction are required by law to take effect on July 21, Congress said the Fed had to write rules on the exclusivity and routing provisions by July 21. It did not provide a specific effective date for the routing and exclusivity provisions. “Delaying the effective date of these provisions would not undermine merchants’ ability to pay lower fees to large issuers. Such a delay would, however, allow time for the exemption to work for small issuers, as Congress intended, without any group of issuers or the federal government being harmed as a result of compliance with the routing and exclusivity provisions,” the letter adds. Cheney noted that “there is little clarity” on the impact that portions of the interchange proposal that address routing and exclusivity will have on the financial marketplace. The letter added that “there is a significant likelihood” that these provisions will undermine the exemption for small issuers. “There are also concerns about the effects of these provisions on government debit card programs,” Cheney added. Separate House and Senate bills would delay implementation of the new interchange rules and would order a study of the impact a debit card interchange fee cap would have on consumers, financial institutions, and merchants. In the House, Rep. Shelley Moore Capito's (R-W.Va.) H.R. 1081 has 84 co-sponsors. The Senate version of interchange delay legislation (S. 575), introduced by Sen. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), has 16 co-sponsors. CUNA continues to back both of these pieces of legislation, and credit unions and leagues nationwide have called on legislators to support an interchange delay in recent in-district meetings. Credit union members and other supporters have also directly contacted their respective members of Congress via e-mail, with over 200,000 of them reaching their legislators through CUNA’s CapWiz program.


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