Debit Fees Focus Shifts To Creation Of Two-Tiered System

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WASHINGTON – Credit union lobbyists were licking their wounds yesterday after failing to get a delay in the Federal Reserve’s debit rule, but began work aimed at ensuring the exemption for credit unions and community banks is adequate.

“The two-tiered system is on its way to implementation,” said CUNA President Bill Cheney, after the Senate failed to pass a measure to delay the cuts in debit fees.

Yesterday’s Senate action clears the way for the Fed – probably at its June 20 scheduled meeting – to approve a final rule in time for its July 21 implementation.

Cheney said CUNA has been working with Visa, which has pledged to implement a two-tiered system, and plans to work with MasterCard, which has been waiting to see what the Senate does before committing, to ensure that a system setting the Fed’s mandated fees for card issuers with more than $10 billion in assets is separated from fees the card networks collect for those with less than $10 billion. He was optimistic that Senators who voted against delaying the rule were legitimate in their pledge to ensure smaller institutions are not adversely affected. “We’re going to hold the senators to their word to making a two-tiered system work,” he told Credit Union Journal.

The Senate on Wednesday voted against a proposed delay in the Durbin amendment, passed last year as part of the Wall Street reform bill. Supporters of the delay, which would have been as long as two years, won a majority of the Senate votes, 54-to-45, but failed to get the 60 votes needed to overcome a filibuster by Sen. Richard Durbin, the Illinois Democrat who has championed the cuts in debit fees.

After yesterday’s vote NAFCU President Fred Becker noted that legal avenues were still open to overturning the Fed’s rulemaking, including a pending lawsuit by Minnesota’s TCF Bank, and expected challenges after the Fed approves a final rule.

Either way, a legislative remedy probably is out for now, as senators on both sides of the issue insisted during yesterday’s debate they do not want to revisit this issue, which pitted big lobbies – banks and credit unions and merchants – against each other.

“Credit unions will have to come up with a Plan B to mitigate the consequences,” said NAFCU’s Becker.


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