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.