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Fed to consider final interchange rule June 29
WASHINGTON (6/22/11)--The Federal Reserve Board Tuesday announced it will consider a final rule to implement a statutory cap on debit card interchange fees at an open meeting on Wednesday, June 29. The Fed agenda item is described as: Proposed Governing Debit Card Interchange Fees, the Fraud Prevention Adjustment, Routing and Exclusivity Restrictions and related matters. All eyes have been on the Fed since the U.S. Senate earlier this month voted against imposing a delay on the fee cap rule, which was ordered by last year’s Dodd-Frank Wall Street Reform Act. Dodd-Frank said the Fed must set a cap that is “reasonable and proportionate” and that exempts issuers with less than $10 billion in assets. Credit unions and other card issuers have objected to the Fed’s draft proposal that would have set the cap at 12 cents per transaction. They have voiced concern that such a low fee does not factor in enough costs and could force debit card issuers to charge fees to consumers for the popular debit card service. The fact that the Fed’s plan has not factored in fraud costs has been a major concern. Dodd-Frank set a July 21 implementation date for the interchange rule. When the Senate failed to pass the bill that would have delayed implementation by a year, the Credit Union National Association (CUNA) promptly sent a letter to all Fed governors to reiterate several recommendations that could help insulate small issuers from the negative impact on their income that many fear will be the result of the Fed's current proposal. Among the actions CUNA President/CEO Bill Cheney suggested:
* Establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established and then report annually on how such a two-tiered system is working, and also provide that information to Congress; * Include all allowable and reasonable costs in setting the cap on interchange fees; and * Revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers. (See resource link for full letter.)
Cheney also noted that the Senate clearly acknowledged with its 54-45 vote on the delay bill that there are issues with the debit card interchange fee cap that need to be examined before a rule goes into effect. "The legislation to delay the interchange provisions of the Dodd-Frank Act required 60 votes to pass the Senate, and it is a sore disappointment that the vote fell short of that. However, it is important to note that a majority of senators voted with us on the delay,” Cheney said at the time. He urged credit unions to build on the support and ask their senators to contact the Fed to recommend changes to the draft proposal to minimize negative effects on credit unions and their members. ( Use the second resource link to see CUNA’s 13 points to raise to the Fed. Cheney Letter to the Fed CUNA's 13 Points to Raise to the Fed


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