Cheney Responds to USA Today Editorial on Interchange (Misc News: April 5, 2011)
This story originally appeared on USA Today.
Opposing view: New rules mean new fees
By Bill Cheney
Some of the rhetoric favoring the new law limiting debit interchange cites "bank bailouts," "lining the pockets of Wall Street" and "pro-consumer" as justification. Those flashy phrases, however, mask the real issue about this law facing small institutions, including community banks and credit unions: We are Main Street; nobody is lining our pockets.
But the new law will have a profound impact on how members are served by their credit unions, likely forcing them to charge new and unwanted fees for debit cards.
That's not "pro-consumer."
The rules proposed by the Federal Reserve will harshly curb what credit unions earn to cover the costs of debit cards to their members. The Fed could not consider "all costs," including those related to fraud — a significant component of debit-related costs, as I found in running a credit union for nine years.
For big banks, recovering all the true costs might not be a big deal; they already charge very high fees, and some have said that free checking is a thing of the past.
Member-owned, not-for-profit credit unions might also have to pass the costs on to their members — as lower return on savings or as fees on debit cards or other transactions. It's the last thing credit unions want to do, but they might have no choice.
None of this was considered when the law was debated last year, primarily because of the proposed exemption for small institutions. We don't expect this exemption to work, due to market forces and the absence of any enforcement mechanism.
Before the law and rules take effect, the impact on consumers — including 92 million credit union members — should be properly explored.
Proposed legislation to delay the rules, and study the real impact of the law, gives credit union members a ray of hope that seamlessly accepted debit cards will continue to be available to them at the lowest cost and highest efficiency.
Why not take time to ensure this new law and rules really could be pro-consumer? Yes, merchants stand to rake in a multibillion dollar windfall from this new law, but why does it have to be on the backs of credit union members and consumers?
Bill Cheney is president and CEO of the CUNA.
Click here to read the USA Today editorial.