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Cheney: Revised Interchange Rule Is Good Outcome for CUs   (Misc News: July 1, 2011)

While CUNA remains opposed to debit interchange rules on the grounds that it amounts to government price fixing, President/CEO Bill Cheney said the heavily revised final rule is a good outcome for credit unions.

During a conference call Thursday, Cheney said he was surprised when Fed governors repeatedly mentioned their worries about the effects of the rule on small issuers, specifically mentioning credit unions several times.

“They spend very little time talking about credit unions,” Cheney said.

Mary Dunn, CUNA’s senior vice president and deputy general counsel, said that while the Fed is not authorized to establish a two-tier system implementing the small issuer exemption, it did require networks to report on their fee structures, which she called the next best thing.

Dunn added that Gov. Daniel Tarullo’s informal amendment directing the Fed staff to study the impact on small issuers was an important development.

“We think that’s very, very positive. We’ll be working with the Fed on those studies.”

Bill Hampel, senior vice president of research and policy analysis and chief economist for CUNA, said the higher interchange cap will make implementing a the two-tier system easier. If it works as planned, large issuers will have to raise fees, while small issuers won’t.

The proposal calls for a base interchange fee of 21 cents. On top of that, the Fed has put out an interim final rule calling for an additional penny for fraud mitigation if certain conditions are met. The rule also includes 5 basis points ad valorem for fraud. So, if all conditions are meant, a $10 transaction would result in an interchange fee of 22.5 cents. A $100 transaction would bring in 27 cents and a $1 million transaction would net $5.22. For the average transaction of $38, the interchange fee would be doubled from 12 cents in the original proposal to 24.

While retailers celebrated a huge victory when the Senate proposal to delay interchange failed, John Magill, CUNA’s senior vice president for legislative affairs, said they were not as happy with the Fed’s new rule.

He said the National Association for Convenience and Fuel Retailing was “livid.” The National Retail Federation was “seriously disappointed” and found the final rule “unacceptable.”

He added that retailers probably won’t have an opportunity to bring the issue up in Congress again because of this latest battle, one that many lobbyists have said was the most heated debate they had ever been a part of. Much of that activity was generated by credit unions, state leagues and CUNA.

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