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.