CONSUMER GROUPS BATTLE CUS, BANKS OVER INTERCHANGE
WASHINGTON-In lobbying to defeat an amendment to the bank bill that would roll back interchange fees on debit cards credit unions are finding themselves in an increasingly familiar position-opposing the consumer lobby groups.
"The credit unions got on the overdraft bandwagon, that was a big mistake. They should not be getting on the interchange bandwagon," said Edwin Mierzwinski, consumer protection director of U.S. Public Interest Group, one of several consumer lobbies backing the Senate's interchange provision.
The CUs' interchange efforts, according to Mierzwinski, is another example of the banking lobby "dragging the credit unions along," like the legislative battles over bankruptcy reform, overdraft protection and credit cards.
The well-known consumer advocate said his group believes the interchange amendment, which would have the Federal Reserve direct large card issuers-but not credit unions or community banks-to lower interchange fees deemed excessive, will aid consumers by lowering the growing fees, estimated at about $50 billion a year. "The issue here, is the merchants can't negotiate with banks or credit unions (for lower rates)," Mierzwinski told Credit Union Journal, adding that interchange rates are set by a market duopoly, the MasterCard and Visa networks that are controlled by big banks. "The battle here is over a few unfair contractual practices."
But credit unions, who earn billions of dollars in the lucrative card fees, argue lower fees will not necessarily go toward consumers' wallets, but instead will end up in the pockets of the retailers, especially the big box companies like Wal-Mart that are driving the issue. They question why consumer groups like U.S. PIRG did not support amendments that would have required retailers to pass back lower fees to consumers.
The so-called credit union carve-out from the bill, exempting credit unions and banks under $10 billion form the Fed's price controls, will have unintended consequences by forcing small issuers to either lower their rates to compete with the big banks or abandon the market altogether, according to NAFCU. "The fact remains, credit unions will sell their portfolios and the only people offering cards will be big banks that have the economies of scale, in turn, the big banks will charge higher interest rates and fees," said Dan Berger, chief lobbyist for NAFCU, which is helping to organize opposition to the interchange amendments.
U.S. PIRG's Mierzwinski labeled the provision of debit card fees "part of the battle in a bigger war," to open up the lucrative cards market, which is more than 80% controlled by the two cards giants, to greater competition and transparency. Interchange fees on cards, which average more than two cents for every transaction in the U.S., is the highest in the world, according to the consumer advocate. "A world where banks get two cents of every dollar of virtually every transaction-non negotiable-is not a good world," he said.
He noted several other provisions of the interchange provision that he believes are pro-consumer, including language that will bar MasterCard and Visa from prohibiting merchants from offering a discount for the use of cash, instead of a credit or debit card, or from prohibiting merchants from encouraging the use of cards with lower fees.
The credit union lobby was working over the weekend with representative of House and Senate leaders who will meet after this week's congressional recess to hash out differences on the separate versions of the bank bill in hopes of persuading them to scrap the interchange language, which was not included in the House's version passed in December.
MORE SAND STATE BANKS CRUMBLE; 78 FAILURES SO FAR THIS YEAR
WASHINGTON-Five more Sand State banks, including three affiliated in Florida, were seized by regulators recently, making a total of 78 failures for the year.
Those failures include the $1.3-billion Bank of Florida's three lenders, Bank of Florida-Tampa Bay, Bank of Florida Southwest and Bank of Florida Southeast, which were all taken over by EverBank Financial Corp., an $11.5 billion institution based in Jacksonville.
Also seized Friday were SunWest Bank a $360 million Las Vegas bank, and Granite Community Bank, a $100 million bank in Granite Bay, Calif.
There have been 12 credit union failures so far this year.
FDIC'S 'LIVING WILL' PROPOSAL DOESN'T FIND SUPPORT AT NCUA
ALEXANDRIA, Va.-NCUA said it is not interested in a proposal issued for public comment by the FDIC that would require the biggest banks to provide regulators a plan for winding down in case of failure-a so-called Living Will.
The FDIC's proposal would apply to about 40 banks over $10 billion in assets that are part of a larger holding company with more than $100 billion in assets.
The measure is meant to complement to reforms being considered in Congress that would require the largest financial firms to submit living wills. That reform is designed to reduce the impression that some firms are too big to fail. "It is a very real problem we saw in the crisis," FDIC chairman Sheila Bair said about the "too big to fail" problem.
