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Interchange MBLs see Thursday Senate spotlight
WASHINGTON (4/1/11)—Two of the credit union world’s hot-button issues--delaying implementation of debit card interchange fee limits and lifting the member business lending (MBL) cap--were spotlighted Thursday in Senate floor remarks by key lawmakers. With Senate colleagues around him, Sen. Jon Tester (D-Mont.) urged support for legislation that would delay the implementation of the Federal Reserve’s planned interchange fee rate cap, noting that Congress should not let these new regulations come into effect before knowing both the intended and unintended consequences of this action. The interchange provisions, which could become effective in late July, could lower the amount of transaction fees charged to seven cents per card swipe. The legislation, as currently written, would exempt credit unions and other small institutions with assets of $10 billion and under from the terms of the regulations. However, there is much debate over whether this proposed exemption would work as planned. Federal regulators, including Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair, have publicly questioned whether small issuers would benefit from this exemption. Fed Chairman Ben Bernanke this week said that his agency would not be able to meet a statutory April 21 deadline for the issuance of debit interchange fee standards. The new standards are currently set to come into law on July 21. The Credit Union National Association (CUNA) this week said that releasing a final version of the proposal so close to the deadline would not give institutions, networks, and the marketplace the time needed to prepare for compliance with a final rule. Tester and Senate colleague Bob Corker (R-Tenn.) have introduced legislation that would delay by one year the implementation of these new standards, and that legislation could be offered as an amendment to a still developing small business package. The Senator said that the interchange issue, which is contentious, is not about picking sides. Rather, he added, it is about not tramping on the financial infrastructure that communities nationwide need. “When government sets prices on swipe fees it's the little guy who gets hurt,” Tester said. The Montana Democrat said that the interchange regulations would only add to the costs incurred by credit unions and other small institutions. These costs would harm the ability of these institutions to compete with larger financial service providers, and could result in the closure of smaller institutions. This could, in the end, cause financial market consolidation, Tester said. Tester’s remarks followed an earlier floor statement in which Sen. Richard Durbin (D-Ill.), the architect of the interchange legislation, defended his bill against his bill's critics. Sen. Mark Udall (D-Colo.) earlier in the day highlighted his MBL cap legislation, and called on his fellow Senators to help him “get government out of the way” and allow credit unions to increase their lending to small businesses. He also criticized the current “arbitrary cap” limiting MBL activity to 12.25% of a credit union’s total assets. Udall’s S. 509, The Small Business Lending Enhancement Act of 2011, would increase the MBL cap to 27.5% of a credit union's assets. CUNA has estimated that the MBL cap lift could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs, at no cost to taxpayers. Udall clarified that Senate Banking Committee Chairman Tim Johnson (D-S.D.) does not oppose lifting the MBL cap, and has said that he would like to examine the issue further. Udall in a blog post released earlier this week said that he would "continue to fight" for his "common-sense and bipartisan" legislation.


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