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

Effort to Delay Debit Interchange Falls 6 Votes Short in Senate   (Misc News: June 8, 2011)

After months of lobbying, led by credit unions and their supporters, the U.S. Senate failed to garner the 60 votes needed to pass a delay of debit interchange, losing 54-45, six votes short of the number needed.

And despite intense lobbying from Michigan credit unions the state’s two Democratic senators split on the measure with Debbie Stabenow voting “aye” and Carl Levin voting “nay.”

After the vote, CUNA President/CEO Bill Cheney said credit unions are "deeply disappointed the Senate disregarded the more than half a million contacts made by credit unions and their members over the last three months in failing to pass the Tester-Corker amendment."

Cheney emphasized credit unions will have tough choices ahead of them as they figure out how to replace lost interchange income.

"Much as they would prefer not to, credit unions will have no recourse but to make up these costs by imposing new fees or service restrictions on their members," he said. “How are consumers better off under this scenario? The plain fact is they are not.”

CUNA, the Electronic Payments Coalition and small bankers’ associations led a massive effort on Capitol Hill to delay the debit interchange rule from taking effect on July 21.

Now, CUNA’s efforts will turn to persuading the Federal Reserve to soften its rule, which calls for a cap of 12 cents on debit interchange transactions. The Fed was originally supposed to publish its final rule on April 21, but delayed it because of the large volume of technical comments that it received. Now, with just more than a month before it goes into effect, the Fed still hasn’t issued a final rule.

Another possibility to delay interchange is a court battle by TCF Bank, which calls the cap unconstitutional. CUNA has supported the Minnesota-based bank as the case winds its way through the court system.

The debit interchange cap was inserted at the last minute as an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed last summer.

CUNA says that the law does not allow the Fed to consider costs such as fraud protection in the interchange fee cap.

The biggest area of disagreement over interchange has been the exemption of small issuers with less than $10 billion in assets. CUNA officials don’t believe – and most federal and state regulators agree – that the carve-out for small financial institutions will work in the marketplace.

The prime sponsors of the bill to delay the measure, Sen. Jon Tester, D-Mont., and Sen. Bob Corker, R-Tenn., gave passionate final speeches on the floor of the Senate, as did the bill’s main opponent, Sen. Dick Durbin, D-Ill. Allowing the interchange cap to go forward “puts another nail in the coffin of rural America” Tester said in his speech.

The failure to win a delay of the rule wasn’t for a lack of effort on the part of credit unions. Cheney said last week that credit unions had made the issue “radioactive” in Washington with their calls, letters and comments. Even as late as Wednesday morning, as CUNA asked credit union supporters to continue calling their senators’ offices, the association’s chief lobbyist reported that many chiefs of staff said they had been inundated by calls from credit union supporters.

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