Credit Unions Have Played Key Role in Protecting Interchange
Since last year, a coalition of merchants has been lobbying Congress for legislation that would cut or cap credit and debit card interchange and a coalition of card brands, processors and issuers have been lobbying Congress to oppose the effort. CSCU CEO Robert Hackney has attributed card interchange as being 32% of total noninterest fee income for card issuing credit unions.
Speaking to credit union card executives attending Card Services for Credit Unions 20th anniversary annual meeting, Dan McDermott, head of U.S. government relations for Visa, praised credit unions for their help fighting to keep card interchange from being cut or capped.
"Together with credit unions we have managed to do some key work in educating law makers about the interchange issue and the impact it really has on small card issuers," he told the executives.
McDermott put the interchange issue in the context of both the changed political atmosphere and dynamics in Washington this year and the overall effort to reform the credit card practices or primarily large bank card issuers and described the merchant effort to find a winning message on the issue.
"You might have seen some of the merchant ads from last year," McDermott said, describing the ad of the Merchant Payments Coalition produced and purchased on the issue.
"In one you might recall a small child is pictured playing a role as a pirate while a voice over claims that card executives wanted to be pirates as little children and grew up to become pirates in the card industry with allegedly unfair fees, et cetera," McDermott said. "What they were playing on was the lack of information and understanding among lawmakers about the interchange issue."
The MPC also chose last year not to try to advance the legislation through the House and Senate Committees which oversee card issuers, opting instead to try to work through judiciary committees, using an argument that card interchange is an anti-trust issue.
The Electronic Payments Coalition, the group of card issuers, processors and brands which formed to fight the merchant effort, blocked that legislative attempt, McDermott explained, by mustering credit unions and other smaller card issuers like community banks to explain the interchange issue to lawmakers.
McDermott said the impact of the EPC's effort came through when the merchant's interchange bill was marked up in the House Judiciary Committee last year. Even though it had been introduced and championed by Committee Chairman Rep. John Conyers (D-Mich.), the bill only narrowly made it through the committee.
"The bill mark up had been scheduled for 30 minutes," McDermott said, "and it ended up taking seven hours."
Since then McDermott explained that the merchants had shifted their effort to try to attack the interchange issue by riding on back of the card reform effort but added that, at least so far, that had not worked either.
"We are still watching closely to make sure nothing is added on interchange to the card reform bills on the floors of either chamber," McDermott said, "but so far we have not seen anything."
McDermott also reported that a previous merchant effort to target eight freshman Democratic House members with specific advertising in their districts had also failed and wound up bringing a backlash on the merchants.
"In the political world, one of your most vulnerable times is when you are a freshman member of the House of Representatives," McDermott said. "Running this ad campaign when the measure they wanted the members to support was not even supported by committee chairman felt a lot like unwarranted pressure to the Democratic leadership."
He also suggested that once the credit card reform measured passed Congress, legislators would be unlikely to visit cards again this year.
"[The card reform measures] are about as detailed as Congress is likely to go with cards this year," McDermott said. "I don't see the issue coming up again for a while."