State Governments Join Fight Against Interchange Amendment

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WASHINGTON – A growing number of state governments are adding their voice to the opposition bank bill’s interchange provision, saying passage of the provision could cause card issuers to abandon low-profit debit cards being used to provide public assistance.

“For states, a regulated debit interchange rate would decrease or eliminate the ability of financial institutions to offer these cost-effective programs to the public sector,” said Michael Fitzgerald, treasurer for the state of Iowa, in a June 2 letter to leaders of the House and Senate. “As a result, financial institutions issuing these cards may raise fees on cardholders or states to recoup lost revenue.”

“Our position really focuses on the fact that we use these debit cards to distribute public assistance. We like these and we don’t want to go back to writing checks,” Karen Austin, deputy treasurer for Iowa, told Credit Union Journal yesterday.

In a separate letter to congressional leaders the Nebraska treasurer also weighed in against the provision. “Even though the amendment would provide merchants with the ability to set minimum thresholds on card acceptance for just credit cards, it is likely that merchants would fail to distinguish product types when presented for purchases at their point-of-sale and inadvertently turn away customers seeking to pay with prepaid benefits cards,” wrote Shane Osborn, the Nebraska treasurer.

He said the amendment would undermine states’ efforts to provide financial products to low-income Americans. There are currently 47 states that either have or are in the process of implementing debit programs for the distribution of government benefits, such as unemployment or Temporary Assistance to Needy Families.


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