CUNA Presses Fed To Delay Interchange Rules For Small Debit Issuers

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WASHINGTON — In a comment letter to the Federal Reserve on implementing the Dodd-Frank Act, CUNA last week said Congress intended for small debit card issuers to be protected from the rate regulations in the interchange law.

Nevertheless, said CUNA, the Fed's implementation fails to do so. Moreover, the trade group wrote, given how many issues related to the law remain to be resolved, the Fed should delay implementation of the interchange regulation by up to 24 months to allow more time for discussion and consideration of how the interchange regulations would impact credit unions.

In its letter, CUNA told the Fed that the interchange fee regulation is the most significant regulatory issue facing credit unions that offer debit cards, and said that credit unions are concerned about the impact that the interchange proposal could have on their members, debit card programs, and day-to-day operations.

The letter was sent in response to the interchange provisions, which were released for public comment late in 2010, would cap debit card interchange fees that are paid by merchants to large debit card issuers at no more than 12 cents per transaction. By law, issuers with under $10 billion in assets are entitled to be exempted from the interchange fee rate setting provisions.

Dodd-Frank directs the Fed to issue a final rule by April 21. If approved, the rule would become effective in July, without the delay called for in CUNA's comment letter.

Should the Fed opt not to delay implementation, CUNA called for substantial changes to be made, arguing the current law as written would not withstand judicial review.

In addition, CUNA pressed the Fed to replace its proposed interchange fee rate caps, which were not required by Congress. They should be replaced with standards for assessing the "reasonableness and proportionality of interchange fees, which Congress requires," CUNA said.

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