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The Story on Interchange

There’s been a lot of discussion lately around “Interchange,” or U.S. Sen. Dick Durbin’s Credit Card Competition Act. I want to take a moment with this blog post to give readers a bit of historical context about the bill and why MCUL and our partners at CUNA are strongly opposed to this recently introduced legislation.

The argument being made with the bill is that it’s necessary in order to create more competition into the credit card marketplace, which will drive down credit card interchange fees and result in savings being passed on to consumers.

If that line sounds familiar, it’s because in 2010, Durbin said something very similar when talking about his so-called “Durbin Amendment,” which was added into the Dodd-Frank Act at the last minute. That Amendment similarly targeted interchange fees to benefit large retailers who failed to pass on their savings to the consumer. Rather, they lined their own pockets with this new income.

Consumers weren’t the only ones that lost out on the deal — so did community financial institutions, since the Amendment resulted in the elimination of many low-cost banking services, free checking accounts and debit card reward programs. This meant our industry became more reliant on overdraft fees and minimum-balance requirements.

Now, fast-forward back to today and the Credit Card Competition Act. Because of what happened with the Durbin Amendment, we’re now able to recognize that the language Durbin is using in this new piece of legislation will have the same effect: a win for the big retailers while consumers and community financial organizations are left holding the bag.

It’s also worth noting that this legislation includes language that would have a substantial effect on credit card payment systems. And as we know all too well, changes to any part of the current card system would translate to increased costs for financial institutions.

The Michigan Credit Union League believes it is unfair and unreasonable for retailers to gain such benefit off the backs of consumers and community organizations. We need to continue to protect consumers and retailers while also recognizing that credit card issuers are not only protecting consumer data but also assuming all of the risk involved in a credit card transaction.

MCUL’s Advocacy Team is working hard to educate the Michigan congressional delegation on the Credit Card Competition Act and is asking members of the delegation to oppose the bill. But we need your help to make sure the legislation doesn’t gain momentum.

Please take a minute or two out of your day to review CUNA’s action alert on the issue — enter your name and address and submit the alert so Congress can hear directly from you on the issue. CUNA’s action alert can be found at: protectinterchange.com/take-action/.

According to CUNA, at the time of this blog, Michigan is leading the way in contacts into Congress opposing this legislation. So far, we've had more than 6,000 contacts. That's amazing! Let's keep this momentum up. Share this link with those in your networks and urge them to also complete and submit the action alert.

Thank you for your help on this issue.

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