Credit unions will be keeping a close eye on the U.S. Supreme Court, which recently agreed to hear a fight over automated-teller-machine fees that pit the interests of independent cash machine operators and consumers on one hand against two major card networks and several megabanks on the other.
The matter, which joins several related suits, was one of eight cases the court recently agreed to accept, and while credit unions are directly involved the suit, some payments experts have said the outcome could have significant repercussions for the movement.
At issue is the ability of Visa, MasterCard and affiliated banks to set out-of-network, or "foreign," ATM fees and the ability of consumers to challenge them under federal antitrust laws. JPMorgan Chase, Bank of America and Wells Fargo were also defendants in the case.
A lower court dismissed the claims that Visa and MasterCard's rules prevent some cash machines from charging lower fees for transactions processed on other networks, but the U.S. Court of Appeals for the D.C. Circuit ruled last August that the cases had merit and ordered them to be reheard.
Visa and Mastercard appealed to the Supreme Court, arguing that the allegations in the lawsuit aren't specific enough for the case to go forward.
CUs and CUSOs
St. Petersburg, Fla.-based financial services provider PSCU expressed support for the lower court's initial decision — telling Credit Union Journal the CUSO believes SCOTUS should overturn the Court of Appeals and come to the decision that the card networks are in a better position to set pricing than the government.
"As we have seen with the Durbin Amendment and Regulation II, price regulation often creates unintended consequences," PSCU SVP, Legal and General Counsel, Steve Salzer said.
Furthermore, credit unions usually offer low or no ATM fees, which would mean they would not be subjected to new rules, the SVP said, "they can impact credit union members if they use an ATM at a higher-fee bank…higher fees are one of the many reasons that credit unions offer consumers better value than banks," Salzer added.
When Rancho Cucamonga, Calif.-based CO-OP Financial Services, which manages a network of 30,000 ATMs throughout the nation, was formed in 1981it aimed to provide credit union owners the ability to set fees and rules for transaction exchange themselves.
What began as 20 CUs in Southern Calif., "has become the largest truly surcharge-free ATM network," according to CO-OP Executive Vice President of Network Operations and Corporate Development Jim Hanisch.
According to Hanisch, this case is mainly targeted at Visa, MasterCard and a grouping of large banks, but Hanisch is worried the ruling would affect CO-OP and other entities like it in the CU industry. "My concern is that there will be a ruling with unintended consequences — one that would impact the ability of our members to set fees and rules for our network," Hanisch said in an email to Credit Union Journal.
The National Association of Federal Credit Unions' General Counsel Carrie Hunt also believes this outcome could potentially "have a big impact on the role of major card networks," she said. The industry will undoubtedly be watching the case closely.
Independent ATMs
Independent ATM operators have claimed that Visa and MasterCard unlawfully control the fees that ATM operators are allowed to charge for transactions processed over third-party networks. The rules prevent ATM operators from offering lower prices if customers withdraw money from machines using transaction networks that are not affiliated with Visa and MasterCard, they have argued.
"By forbidding ATM operators from lowering access fees for lower-cost networks, the ATM restraints harm competition among ATMs, harm competition among networks, raise ATM access fees for consumers, and raise network services fees for ATM operators," the plaintiffs in the suits wrote in a filing with the Supreme Court in March.
Bloomberg News contributed to this article.
