Thursday, May 27, 2010

Interchange Fee Update - May 27th

Earlier this year the House passed the Wall Street Reform bill, with no major concerns for credit unions. The bill in the Senate also did not directly impact credit unions, until Senator Richard Durbin’s (D-IL) Interchange Amendment was adopted on the Senate floor by a vote of 64 – 33. It is important to note that there were no hearings or public comment to provide an analysis of the probable financial impact to consumers as a result of the interchange fee amendment. The amendment requires the Federal Reserve to develop regulations to ensure that interchange fees are proportional to costs of the transaction, not the cost of operating a debit card program, which does involve considerable expense and risks. Although there is language to exempt issuers under $10 billion in assets, VISA and the other networks would have no incentive to create two pricing structures and even if they did, merchants may be able to discriminate against what would be the higher priced credit union cards. In addition, merchants would be able to set maximum and minimum limits on purchases by debit cards. For example, they could decide to not allow card transactions on amounts of $5 or less. Regardless of any exemption or carve-out for credit unions, this interchange language would be extremely detrimental to the ability of credit unions to offer debit cards without having to institute account fees and other anti-consumer measures to make up the loss in revenue.

Because the House and Senate bills are different, they have to be reconciled in a “Conference Committee” which is comprised of committee leaders from both parties from the House and Senate, about 20 – 25 members in total. They will put together a final bill called a Conference Report, which is then sent back to the House and Senate for an up or down vote, without amendment. Once passed, it goes to the President’s desk. Making necessary changes (removing this interchange fee provision) in Conference Committee is what credit unions are asking for.

The insertion of this Interchange Amendment into the Wall Street Reform Bill is puzzling. Credit unions are not Wall Street. Credit unions did not create the near financial collapse to the entire country that Wall Street firms did with their complex financial products. Credit union members want to have affordable, convenient access to their funds. Debit cards have been a great product for members because of the convenience, safety, and worldwide acceptance. Debit cards have also been a great product for retailers. How many retailers now have online stores that could have never increased their sales without the card payment system that they now complain about?

It has been said before and I will repeat it again here. The card payment system is not broken. The retailers are profitable, even more so because of the expanded sales opportunities created by online sales. We are asking Congress to leave the card payment system alone and drop the interchange fee amendment from the Wall Street Reform Bill.

I would encourage members to voice their opposition to Congress on the proposed changes to the current card payment system. A special toll free telephone line has been established to allow members the opportunity to contact Congress on this issue. The number is 1-877-223-5275.

Tuesday, May 18, 2010

NAECU - One of the "Good Guys"

Madison Magazine ran an article recently on the credit union and our office in Madison. We were very pleased with the positive message relayed in the article. In these uncertain financial times, it is nice to be part of the solution rather than part of the problem.

Check it out!

Friday, May 14, 2010

Action Alert Update - May 14th

The interchange fee amendment did pass in the United States Senate. We do want to thank our two Senators, Senator Richard Shelby and Senator Jeff Sessions, for voting against the amendment. Additional opportunities to oppose this interchange fee amendment will be available in the future. I thank those members who took the time to review this issue and contact Senator Jeff Sessions for his support on opposing the interchange fee amendment.

Monday, May 10, 2010

Action Alert - Contact Senator Jeff Sessions


I am writing to you about an issue that could negatively impact all members of our credit union.

Each time you use your credit union credit card or debit card, a merchant is paid immediately and the card receives "interchange" through a card payment system. This interchange system reflects a merchant's fair share of the costs of this payment system. The Senate is debating S. 3217, the Restoring American Financial Stability Act of 2010. Some amendments would threaten our ability to offer debit and credit cards and allow merchants to interfere with consumer choice by arbitrarily varying the terms of card acceptance. The bottom line is that big retailers want to shift their cost of doing business on to you, our credit union member. If the amendments pass, our credit union could be forced to raise rates and fees, or even curtail debit and credit card offerings in the future. Please contact Senator Jeff Sessions at 202-224-4124 urging him to oppose any amendments to S. 3217 which would affect debit and credit card-issuing credit unions and the card payment system. (Senator Richard Shelby has already indicated his opposition to these amendments).

If any members have any questions regarding the interchange amendment, please feel free to contact me. Your voice and help would be appreciated!

Thursday, May 6, 2010

Restoring American Financial Stability Act of 2010

The U.S. Senate is currently debating S. 3217, Restoring American Financial Stability Act of 2010. This bill is the much publicized "too big to fail" legislation that addresses improved oversight of the large financial organizations and the complex investment products that they have created over the years. As with all good legislation that comes forward, there are amendments and pet projects that get added to bills that have little if anything to do with the core purpose of the initial bill.

Amendments are being considered to S. 3217 that would affect debit and credit card-issuing credit unions and the card payment system. The pending amendments threaten credit unions' ability to offer credit and debit cards to their members and would allow merchants to interfere with consumer choice by arbitrarily varying the terms of card acceptance. The merchant-backed proposals are intended to disrupt the card payment system with the goal of reducing the merchants' financial responsibility for the benefits received from the card payment system.

To simplify, merchants don't like having to pay interchange fees when they accept a credit or debit card for a purchase. They probably don't like paying the light bill either but there are costs of doing business. A merchant that accepts and pays interchange fees for a credit or debit transaction receives their money more quickly, with less risk, and opens the door for online purchases. The financial institution uses the interchange income to cover the costs of processing transactions, managing the card program, overnight accounts to fund purchases, and fraud expenses associated with data breaches usually created by the merchants themselves.

Does anyone think that the merchants will lessen their prices if interchange fees are reduced or eliminated? Do merchants want to start accepting checks for $2,000 LCD televisions? The credit union industry is watching these amendment debates very closely and voicing our concerns on behalf of our member-consumers.

The card payment system is not broken so a "fix" is not necessary.