ELLIOTT McENTEE
President, National Automated Clearing House Association McLean, Va.
The Fed continues to make significant changes to prices and service levels without asking the public to comment.
They're increasing the fee from $ 10 to $20 per month [per routing number], and they're changing the reason for the price.
Before, the Fed said the fee was designed to maintain the records of routing numbers. Now, they broaden it to include "servicing" the financial institution.
The doubling of the fee represents a significant increase to the cost of participation in the ACH. Many institutions have only a couple of items a day; they may be paying $1 more per item. They may drop out of the ACH.
There doesn't seem to be a cost basis to this at all. The New York Clearing House says it costs them only $10 a year to maintain a routing number.
There are hundreds of financial institutions that have designated private-sector operators to process ACH transactions. The Fed will still be charging this fee to those financial institutions.
We're going to write another letter to the Federal Reserve, asking them not to approve these changes.
PAUL FINCH JR.
President, Arizona Clearing House Association Phoenix
This is an absolute pricing proposal by an absolute monopoly. No one else can charge this fee.
For the Fed, it's simply a way of getting income that the Fed needs for expenses. But they're doing it in a way that allows them the revenues, but where the private sector can't compete.
The Fed has a stranglehold, as every good monopoly can do, that gives them a great revenue stream. This lets them publish low per-item transaction prices.
Why doesn't the Fed just double the routing number fee again, and eliminate per-item fees?
This is a threat to the private-sector operator.
The routing-number fee is a fee the private sector cannot charge, but it's a fee the private sector has to take into account in evaluating the costs to its customers.
The Fed has a way of gathering in funds that lets them look good on unit costs. The Fed will make $8 million or $9 million a year on this routing-number fee.
This should have gone out for comment.
GEORGE F. THOMAS
Senior vice president, data processing division, New York Clearing House Association
It doesn't really affect us.
The Fed has only one routing number on file for the entire New York Clearing House, so now we pay just $ 10 a month. And when the new fee goes into effect, we'll pay $20. That's not a big deal.
But it will affect our banks two years from now, when the Fed finishes its consolidation of ACH processing. Then all the banks in the Second District will have their routing numbers on file with the Fed.
NACHA has been upset with the whole concept because we in the processing business know it doesn't cost a significant amount of money to maintain the ACH routing-number file.
When banks compare processors they tend to focus on per-item fees, not all the fees that a processor charges.
The Fed stays competitive with the private sector by raising other types of fees and reducing per-item fees.
You have to add together all the fees that any processor charges, and divide by the number of transactions.
Then you'll get the true per-item cost.
