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Stop study start over on interchange CUNA
WASHINGTON (2/17/11)--Allied CU, Stockton, Calif., President/CEO and Credit Union National Association (CUNA) witness Frank Michael today will urge Congress to halt the progress of the Federal Reserve’s interchange proposal and study the impact that interchange changes would have on financial institutions and consumers alike before the interchange rulemaking process can continue. Michael will testify alongside representatives from several financial institutions, a small business, vand nationwide convenience store chain 7-11 during the House financial institutions and consumer credit subcommittee’s hearing on the economic impact of interchange fee changes. Federal Reserve Governor Sarah Raskin will also testify during the hearing, which begins at 10:00 a.m. ET and will be led by subcommittee head Rep. Shelley Moore Capito (R-W. Va.).
Click to view larger image House Financial Institutions Subcommittee Chairman Shelly Moore Capito (R-W.Va.) enjoys a lighter moment during her discussion about Interchange with (from left) Ken Watts, president/ CEO of the West Virginia Credit Union League, and Bill Cheney, president/CEO of the Credit Union National Association. The three met Tuesday to discuss the interchange issues prior to today’s hearing. (CUNA Photo)
The credit union CEO’s testimony is expected to focus on the benefits that the current payment system provides to consumers, merchants, and financial institutions, and the issues that the proposed interchange changes, if enacted, could cause credit unions. Michael is expected to address flaws in the statute, as well as in the Fed’s implementation plans, specifically focusing on how the Fed’s proposed implementing regulation could render the proposed exemption for institutions with under $10 billion in assets meaningless. The interchange plan offers a dual framework for determining interchange fees. One plan would provide issuers with a safe harbor of seven cents per transaction, and set a maximum interchange fee cap of 12 cents per transaction. A second alternative framework would cap the maximum interchange fee at 12 cents per transaction. These safe harbors and/or caps would be reevaluated by the Fed every two years. Merchants have claimed that the resulting savings will be passed on to consumers, but CUNA has repeatedly questioned that assumption, noting that moving forward with the interchange provisions could force credit unions to cease offering debit card programs to their members. CUNA and its Electronic Payments Coalition partners have also opposed the interchange changes through a 30-second television ad that is currently airing in the Washington D.C. media market. (See related Feb. 14 story: Interchange ads launches by CUNA and partners) House colleagues, including Financial Services Committee Chairman Spencer Bachus (R-Ala.) and ranking minority party member, Rep. Barney Frank (D-Mass.), have in recent months commented on the potential impact that interchange changes could have on consumers and financial institutions. Finance committees in both the House and Senate have stated that review of interchange fee changes would be a priority in the 112th Congress, but additional hearings have not yet been planned. The Fed is accepting comment on the interchange provisions until Feb. 22, but does not expect the changes to be implemented until after April. The new rules would become effective in July, if approved.


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