Cheney: House and Senate Interchange Hearings Were Positives for CUs (Misc News: February 17, 2011)
Hearings in the U.S. House and Senate committees Thursday were favorable for small issuers such as credit unions regarding the debit interchange rules the Federal Reserve is considering for implementation later this year.
CUNA President/CEO Bill Cheney said the hearings were positive developments for credit unions.
“Both hearings were very favorable, and the statements and questions of the members (of Congress) participating in these hearings reflected that they had heard from their credit unions,” Cheney said in a letter to league leaders. “However, these hearings are simply a step in a long, multi-front process to fix the problems we expect the Durbin amendment will cause. We have been building momentum on this issue since Congress convened and yesterday’s hearings help keep that momentum going.”
Frank Michael, president and CEO of Allied CU in Stockton, Calif., nd chairman of CUNA's Small Credit Union Committee, was one of several witnesses – and the only one representing small issuers – at the House Subcommittee on Financial Institutions and Consumer Credit regarding the Durbin Amendment to Dodd-Frank Act.
Michael told the panel, which includes Michigan freshman Congressman Bill Huizenga, that the Durbin Amendment and the rule drafted by the Fed, are bad public policy and will have a devastating effect on credit unions. Cheney said that Frank’s comments were roundly commended.
Cheney said that the line of questioning from members of the committee was universally positive, except for questions from Rep. Peter Welch, D-Vt., who was a guest of the committee because of his leadership regarding the bill on the House floor.
During a recent interview with MCUL Public Affairs, Huizenga, R-Zeeland, said he has serious concerns about the interchange provision.
“I am particularly interested in finding out how they came to some of the conclusions they came to because they don’t make a whole lot of sense to me,” Huizenga said. The full story from the interview will appear in the 1st quarter Contact, due out at the end of March.
While the House subcommittee hearing was going on, the Senate Banking Committee was also holding a hearing to discuss implementation of Dodd-Frank.
The CU Journal reported that the Fed doesn’t believe it can stop the provision.
“The Fed doesn't have the power to delay the proposal itself,” Sarah Raskin, one of the seven governors, told members of the House Financial Services Committee.
While several members of the House have indicated a willingness to roll back the Durbin Amendment, there is less enthusiasm for a change in the Senate, where the interchange amendment originated. Sen. Richard Durbin, the Illinois Democrat who crafted the Dodd-Frank provision and an exemption for smaller lenders, has vowed to push back against any changes in the law or the Fed’s proposal.
In his testimony, Bernanke raised concerns about how the exemption for institutions under $10 billion will be enacted, noting that the market is likely to drive more transactions to lower-priced debit cards mandated for the institutions over $10 billion, the Journal reported in a separate story.
“We are not certain how effective that exemption will be,” Bernanke said before the Senate Banking Committee. “It is possible that because merchants will reject more expensive cards from smaller institutions or because networks will not be willing to differentiate the interchange fee for issuers of different sizes, it is possible that the exemption will not be effective in the marketplace.”
The comment period for the Fed proposal ends next week, on Feb. 22. Under Dodd-Frank, the central bank is required to complete work by April 21 on the cap provision, which would go into effect by July 21.
Click here to read a copy of Cheney’s letter.
Click here to obtain a copy of Michael's prepared testimony. Click here to obtain copies of other witnesses' testimony from the Financial Services Committee.