WASHINGTON -- Fed up with high transaction costs paid to bank-owned automated teller machine networks, the credit union industry has put together its own interstate network with the aim of building a national system.
To date, more than 390 credit unions in Arizona, Illinois, Michigan, Missouri, Florida, New York, Connecticut, and Louisiana have gone on-line with the system, known as Member Access. Organizers are eyeing the 42 other states.
With a nationwide network, credit union members from Michigan or New York, for example, could use system ATMs for cash withdrawals or deposits while vacationing in Florida. And they would be able to continue to use their credit union's services if they moved out of state.
National Vision
Organizers envision a nationwide hookup providing access to all 13,000 credit unions, a transaction network rivaled in scope only by the Maestro and Plus networks operated by MasterCard and Visa, respectively.
The project is being organized by Credit Union Interchange Group, a company capitalized with $10,000 in contributions from 18 shareholders, including the Credit Union National Association, CUNA Service Group, and 16 state credit union leagues.
Like the fledgling nationwide shared branching network, regulatory oversight of the project is nebulous. The Federal Credit Union Act allows credit unions to conduct transactions across state lines.
NCUA officials say they have authority over the project by virtue of regulating the individual credit union participants and can thus regulate who may or may not participate. And NCUA is charged with monitoring whether such electronic systems comply with the Electronic Funds Transfer Act, known as Federal Reserve Regulation E.
State Regulators out of Loop
Outside of that, there are few regulations with which such projects must comply. At the recent annual convention of the National Association of State Credit Union Supervisors, state regulators acknowledged that they have little authority to regulate or require examination of entities like shared branching and ATM networks.
Such entities, they say, actually amount to a new kind of financial intermediary and fall between the cracks of the regulatory structure.
But NCUA officials emphasize that the regulator can exercise some oversight through the credit union participants.
"We have all the authority we need if we have to exercise any authority," said Robert Fenner, general counsel for the agency. In addition, he noted the cooperative relationship the agency has always had with CUNA and its affiliates with respect to such projects.
Existing Networks Linked
The idea behind Member Access was simple, said David Pace, vice president for ATM services for the Florida Credit Union League, which is managing the network. The initial effort consisted of connecting as many existing credit union-exclusive ATM networks as possible, making Member Access merely a network of networks.
"This allows is to link all the networks together under the credit union name," said Mr. Pace, who also manages operations for CU 24, the Florida league's ATM network, which has 110 credit union participants.
The networks are linked through a main switching center operated by EDS Services in Clifton, N.J. The settlements are performed by the corporate network's automated settlements network.
Member Access has more than 1,400 terminals on-line in eight states, including ATMs in the more than 500 Publix supermarkets throughout Florida, Mr. Pace said.
High Costs Cited
According to interchange group officials, the driving forces behind the project were the high transaction costs charged to credit unions by some bank-owned ATM networks, and the desire to have a national network dedicated to credit unions.
"In certain states, banks can charge as much as they want and sometimes charge up to $2 per transaction," said Rae Miles, a CUNA vice president who is staffing the project. "We want to give credit unions better access to ATM services and drive prices down for them."
Mr. Pace said Member Access performs the internetwork transactions for 55 cents each. Credit unions may pass on all or some of the cost to members, or pay the costs themselves, he noted. Either way, he said, the costs are less than they would be in a network outside the credit union system.
Officials of the Credit Union Interchange Group are scheduled to meet next month with officials of the California Credit Union Cooperative, the last remaining large credit union network, and with officials from Atlanta-based Service Centers Corp., a 12-state shared branching cooperative, with an eye toward eventual hookup with the emerging nationwide shared branching network.
"The goal is to allow credit unions to pass transaction between ATM networks and shared branching networks," said Ms. Miles.
Mr. Roberts is editor of NCUA Watch and Credit Union Accountant, which are pruduced by American Banker Newsletters. For information about the newsletters, call 800-733-4371.
