A new government report suggests that small card issuers, including credit unions, have not seen lower revenue from debit card transactions, but a Washington Post story says small issuers are reporting the opposite.
The story quotes CUNA Chief Economist Bill Hampel who said early indicators show interchange income was down for the first quarter of 2012, the only period for which numbers are yet available.
“The provision that could really start to lower interchange revenues for smaller institutions took effect in April, and in the only full quarter since then, the third quarter of 2012, we saw the first-ever decline in interchange revenue for credit unions,” Hampel told the newspaper. “We are concerned about whether that was a one-time downward shift or the first of several quarters of decline.”
The Federal Trade Commission reported on Dec. 26 that small issuers have not been significantly impacted by the new interchange law, according to a CUNA analysis of the report.
Click here for more information on the FTC report.
"CUNA has repeatedly warned that merchants may collude with larger banks to steer payments through the lower-cost, fee-capped interchange systems," CUNA Deputy General Counsel Mary Dunn said. "The FTC report does nothing to dispel that concern, or any other concern, long-term.
The study, which was conducted by the General Accounting Office, shows that interchange revenue had dropped by 5% in the first three months of implementation, which began before the rules that were mandated by the Dodd-Frank Act took effect.
“When these (financial institutions) start losing revenue, consumers often start losing free checking and start paying new processing fees,” said Trish Wexler, a spokeswoman for the Electronic Payments Coalition. “In the end, when two large industries fight and go to lawmakers to try to resolve those differences, it’s almost always the consumer who winds up with the short end of the stick.”
The Federal Reserve Board's final rule implementing interchange changes caps debit interchange fees for issuers with more than $10 billion in assets at 21 cents. An additional five basis points per transaction may be charged to cover fraud losses, and an extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap, but CUNA has repeatedly warned that the exemption will not insulate credit unions and other small issuers and they will be adversely impacted by the big-issuers' interchange cap.