Key credit union industry leaders this month are scheduling meetings with members of Congress to make sure credit unions will be appropriately protected in the Federal Reserve Board’s final debit-interchange rules that go into effect Oct. 1.
Credit Union National Association President Bill Cheney told industry members during a June 29 teleconference following the Fed’s announcement of the final rules that the trade group is closely monitoring the process of developing a two-tier system. The Fed’s rule exempts financial institutions with less than $10 billion in assets, which includes most credit unions (
Cheney noted during the teleconference that credit unions and banks continue to worry about the long-term effects of the higher fees they will be able to charge for debit, potentially driving merchants to the lower-cost cards of the biggest issuers, even though provisions of the Fed’s new rule are aimed at preventing such behavior.
On its face, the exemption will protect credit unions from the most dire provisions of the debit rule – a cap in fees of 21 cents per transaction, down from the current average of 44 cents. That will ensure a continued flow of lucrative debit fees to most credit unions and banks, even as the biggest issuers are forced to slash their own fees.
Visa Inc. and MasterCard Worldwide are expected to create a two-tiered system that would cap the fees paid to the big issuers while continuing to allow the smaller issuers to charge higher fees.
The Fed’s Board of Governors all expressed concern about the efficacy of the small issuer exemption. Fed Chairman Ben Bernanke said that current efforts under the Fed’s rule will give regulators “the best shot” in making the exemption effective.
Under the final rule, the Fed will monitor the exemption closely by keeping a list of institutions that fall above and below $10 billion each year and list the average interchange fee by network for exempt banks.
Cheney cited the addition of a six-month study, then an 18-month study on the debit rule’s impact on exempt issuers – credit unions and banks with less than $10 billion in assets – as a victory in their lobby to limit the effects on credit unions.
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