WASHINGTON – Credit unions yesterday joined community banks to express their opposition to proposed amendments to the bank reform bill that would lower interchange fees charged on credit and debit card transactions.
CUNA and NAFCU said they continue to oppose the interchange amendments even as its chief Senate sponsor, Richard Durbin of Illinois, agreed to carve out an exemption for credit unions and banks with less than $10 billion in assets.
Durbin’s amendments call for allowing merchants to offer discounts to consumers who use cash, debit or a particular card network, say a MasterCard instead of a Visa, a practice currently barred by the two major cards networks. Another would allow merchants to set minimum and maximum purchase limits – something major card issuers don't allow and threaten to fine businesses that set them.
CUNA joined the Independent Community Bankers Association in urging Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell for defeat of the Durbin amendments, even with the carve-out language.
CUNA and NAFCU are part of the Electronic Payments Coalition with ICBA, the American Bankers Association, Visa and MasterCard. The Coalition is fighting efforts to regulate interchange that are being pushed by the powerful merchant and retailer lobbies.
“Let’s be clear: interchange is not a ‘big bank’ issue,” said CUNA President Dan Mica and ICBA President Camden Fine in a letter to the Senate leaders. “The fact is, interchange revenue – and the network rules supporting the electronic payments system – is vastly more important to small issuers, which rely on this income and structure to meet their customers’ and members’ needs and product expectations.”
“Nothing in this amendment protects community bank customers or credit union members,” said the letter. “What has been labeled a ‘carve out’ is, in fact, a double-edged sword: by directing the Federal Reserve to regulate only the debit interchange of big banks, the amendment makes our institutions’ debit cards the most expensive for a merchant to accept – something the market will not tolerate for long.”
“To make matters worse,” they said, “nothing would stop Visa and MasterCard from simply applying the artificially lowered interchange rates across the board to all issuers, regardless of size, forcing many credit unions and community banks to reevaluate their ability to offer debit cards. It’s a lose-lose proposition for Main Street financial institutions and consumers.”
Other provisions of the amendment, said the letter, “will only serve to drive credit and debit market share to the big bank issuers and encourage big retailers to enter into sweetheart card acceptance deals that discriminate against community bank and credit union cardholders.”
NAFCU joined other lobby groups in opposing the interchange amendments, including the Latino Coalition, Minority Business Roundtable, the League of Rural Voters and the National Coalition of Latino Clergy and Christian Leaders, who asserted in a joint letter to Senate leaders the proposals “could mortally wound community banks and credit unions, reduce access to capital for small businesses, and further burden working families struggling to make ends meet.”
The Durbin amendments were expected to be voted late yesterday or today. Durbin has vowed to continue his efforts even if the interchange amendments are not added to the bank bill.
