WASHINGTON The credit union lobby is predicting this morning’s court ruling striking down the Durbin amendment’s swipe fee caps could have dire consequences for credit unions and banks.
“This decision will have a potentially devastating impact on the ability of small debit card issuers, particularly credit unions, to continue offering this vital payments service to their members and customers,” said Eric Richard, general counsel for CUNA. “The decision will, no doubt, challenge credit unions to continue their debit card programs without incurring drastic cuts in revenue, or imposing additional fees on their members the last thing that credit unions want to do."
Carrie Hunt, general counsel for NAFCU, said just as worrisome is the part of the court ruling concerning the Durbin amendment’s network exclusivity provisions which will probably require credit unions to contract with at least one more debit provider.
“Right now,” said Richard, “the current debit interchange system remains the same. However, the court has signaled it is going to consider the current system further in the weeks to come. We are investigating our legal options on behalf of credit unions going forward.”
This morning’s ruling by the U.S. District Court for the District of Columbia found the Federal Reserve exceeded its powers to curb debit fees as set out in the 2010 Dodd-Frank Act by allowing additional expenses, such as fraud costs, to be calculated into the Fed’s 21 cents-per-transaction cap on fees paid by Visa and MasterCard to banks and credit unions over $10 billion in assets.
The ruling means the Fed will have to return to the drawing board and probably set even lower caps, costing those institutions billions of dollars in revenue.
There are currently four credit unions coming under the cap's threshold; Navy FCU, North Carolina State Employees’ CU, Pentagon FCU and BECU, with SchoolsFirst FCU in California poised to join the $10 billion club.
But credit unions in opposing the Durbin amendment argue the caps have also put a downward pressure on fees for all of the exempt credit unions and banks, those under $10 billion. NAFCU's Hunt said this morning's ruling will probably put more downward pressure on those fees.
