What Do You Think of Fed Decision on Interchange?

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SAN FRANCISCO-Credit Union Journal asked attendees at NAFCU's annual convention for their reaction to Fed's decision to set the interchange cap at 21 cents, plus an allowance for fraud costs.

Kathie Philp, president and CEO, Pacific Crest FCU, Klamath Falls, Ore.
It is better than I expected, but not good enough. It does not consider the total cost of fraud. We had a fraud last year and we covered the cost for the good of our members. The new rule will not come close to covering a cost like that.

William Koehler, president, AllSouth FCU, Columbia, S.C.
It is better than originally stated, but it still is going to significantly impact our bottom line. Unfortunately, consumers are going to have to pay for it, one way or another. This probably will lead to increased fees on checking accounts. It does not consider all the costs involved. Our credit union is doing well, fortunately, but all of these regulatory changes are impacting our bottom line. Many credit unions are in the same boat - we all are operating on really thin margins.

Larry Wilson, president and CEO, Coastal FCU, Raleigh, N.C.
I am glad the Federal Reserve Board listened to the comments they received from credit unions and others. The final rule was not as favorable as what we had asked for, but it was better than we expected. The point remains it costs us about $5 per account to reissue cards when there is a breach at the merchant, yet people assume the problem is our fault.

I am hopeful the two-tier system will work as Senator [Richard] Durbin promised. But there is a concern that Visa and MasterCard will not be able to run two systems.

Marsha King, president and CEO, Library of Congress FCU, Hyattsville, Md.
We are only $209 million, so we are not at the big threshold, but we still think the rule will have a big impact on our credit union and our debit card programs. We have not yet analyzed exactly what the impact will be. Our fear is what will happen next: will this be applied to credit cards?

Brad Beal, president and CEO, Nevada FCU, Las Vegas
The Fed had to operate within the constraints of the law, so it is difficult to be critical of the Fed. The problem is the law will lead to a massive shift of resources from consumers to retailers, mostly from the consumers who can least afford it. Coming up from 12 cents helps a little bit, but it doesn't really change the big picture.

Douglas Schwartz, president and CEO, Moapa Valley FCU, Overton, Nev.
I think the debit rule is unfortunate because the burden will fall on the members. I think the Fed was forced to act on legislation that will continue to impact members for years, especially those of lesser means. It is unfair to think about putting money back into the retail sector without holding merchants accountable for data breaches.

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