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MCUL’s Adams Looks for Silver Lining in Interchange Defeat   (Misc News: June 10, 2011)

Credit unions suffered a huge disappointment when the Senate failed to approve a measure to delay the debit interchange rule. But MCUL & Affiliates CEO David Adams said the law could create a competitive advantage for credit unions, if the law works as intended.

“This was a defeat for the consumer as big banks will almost certainly pass on new fees to them. But for credit unions, this should be seen as a partial victory,” Adams said. “If the $10 billion asset carve out can be enforced, credit unions will find a competitive pricing advantage on checking accounts and debit cards.”

On Wednesday, the Senate fell six votes short of the 60 needed to pass a bill that would have delayed the new interchange rules from taking effect on July 21.

In theory, the new debit interchange rules could help credit unions since the law includes an exemption for small issuers with less than $10 billion in assets, which includes every credit union in the state. The problem is many observers – including many state and federal regulators – don’t think the carve-out for small institutions will work.

CUNA and the MCUL will now go to work to assure the best possible regulation from the Federal Reserve and to support legal action led by TCF Bank to have the Durbin Amendment found unconstitutional, Adams said. In addition, there could be further legislative efforts to temper the interchange rules.

Adams thanked the Michigan credit union community for their hard work in lobbying Congress on interchange. CUNA President/CEO Bill Cheney said credit unions had made the issue “radioactive” on Capitol Hill and a large share of that pressure came from Michigan credit union supporters.

“Our entire Michigan credit union community should also be very proud of how successful our grassroots advocacy efforts were as we gained support from Senator Stabenow and at least six members of our House delegation,” Adams said.

While Adams said he is looking for the silver lining in Wednesday’s defeat, credit unions will need to be vigilant by making sure the two-tiered system works.

“If the two-tiered system does not work in the marketplace, credit unions will be forced to find alternative sources of income but in the most consumer-friendly way possible.”

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