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Michigan Credit Union League Home » Information Services » Publications » News Articles  

CUNA, MCUL Call for One Last Push on Interchange   (Misc News: June 7, 2011)

With the Senate reportedly on the verge of a vote to delay implementation of debit interchange fee limits within the next 24 to 48 hours, CUNA has issued an urgent call to action asking credit union supporters to make one last-ditch effort to contact their senators to encourage them to vote for the delay.

Also on Tuesday, the National Journal Daily (password required) reported that the bill's sponsors Sen. Jon Tester, D-Mont., and Sen. Bob Corker, R-Tenn., were floating a compromise proposal in an effort to gain the 60 votes they need to pass the bill. Sixty votes are needed to overcome a promised filibuster by Sen. Dick Durbin, the original sponsor of the amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, that put interchange fee limits in motion.

"Since a vote on this amendment is likely to occur in the next 24-48 hours, the best thing to do is to call the office directly by calling the Capitol Switchboard at 202-224-3121," CUNA President/CEO Bill Cheney said.

He said callers should ask for their senator's office and tell the senator or staff that:
•         As a credit union member, I ask you to support the Tester-Corker amendment on debit interchange when it comes up for a vote this week.
•         This is a key vote for credit union members.
•         Make sure you leave your name and address with whoever answers the phone.

MCUL & Affiliates CEO David Adams asked credit unions to join CUNA in making one final push to let Michigan’s senators know that they support the revised language.

Michigan Democratic Sen. Debbie Stabenow, committed to support the delay last week. Democrat Carl Levin remains on the fence.
“With these new developments, we need to make sure that (Stabenow) knows that this new language is acceptable to us and that we need her support,” Adams said in a letter to credit unions.

“In the case of Senator Levin, he has been advocating for letting the Federal Reserve write a strong regulation that will protect the interests of small institutions and consumers. This modified bill will do just that, and with collaboration from the FDIC, OCC and NCUA, it’s something we strongly support.”
According to the Journal story, Tester and Corker believe they have more than 50 votes, but not the 60 needed to move the bill to a final vote. The senators, who already had shortened their proposed delay from two years to 15 months, are now shortening it again to further broaden support for the measure. Many senators are waiting on specifics on the amendment before committing.

In an outline of the proposal obtained by National Journal Daily, Tester and Corker’s new compromise amendment would include a 12-month delay of interchange provisions. It would also require a “six-month study focused on: all costs, impact on consumers, effectiveness of small-issuer exemption, and impact of routing and exclusivity.” UPLOAD DRAFT

It calls on the Fed, the FDIC, the Office of the Comptroller of the Currency and NCUA to determine if the statute fails to consider fixed and incremental costs that banks face processing debit transactions. It also asks the agencies to determine if the rule hurts debit-card consumers and if an exemption in the law for small debit-card issuers would prove ineffective. Opponents of the swipe-fee limits argue all those problems exist with the current law.
If two of the four reviewers reach any one of those three determinations, the Fed will be required to rewrite the rules within six months “taking into account all costs.” The proposal suspends current rules until the six-month study is done. It allows the rule to take effect if two of the four do not agree.

The plan also creates a review process for small financial institutions that issue debit cards.

Adams said that the bill is a good compromise because it wouldn’t require going back to Congress.

“It is somewhat risky because it puts our fate in regulators’ hands but it is probably the best we can do, and we should be able to rely on regulators given that we will have sufficient time to communicate with them in the study process,” Adams said.

Debit interchange has become one of the most fiercely lobbied issues on Capitol Hill in recent memory – Cheney said credit unions had made the issue “radioactive” on Capitol Hill – pitting credit unions and other financial institutions against retailers in a battle over as much as $16 billion annually.

Under the new rules, which are required to take effect July 21, debit interchange fees would be capped at no more than 12 cents per transaction. Currently, the fees average about 44 cents per transaction. CUNA has said that the law does not allow the Federal Reserve, which is drawing up the regulation to implement the law, to consider costs such as fraud prevention in its rule.

The Fed was supposed to release the rule on April 21, but said that it could not meet the deadline because of the large number of very technical comments it had gotten on its proposed rule. It has still not released the final rule, with less than two months before it is supposed to go into effect.

The law includes a provision that exempts small issuers with less than $10 billion in assets, but CUNA and most regulators, including Fed Chairman Ben Bernanke, do not think the carve-out will work in the marketplace.

“We’re still not sure whether it will work … There are market forces that would work against the exemption,” Bernanke told a Senate Banking Committee hearing on May 12.

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