Local Government Federal Credit Union Executive Vice President Mark Caverly framed the issue as one of survival for smaller financial institutions and better value for consumers.
"If issuing institutions terminated their card programs due to a decrease in interchange, consumers would have fewer choices in providers. Those of us who work in smaller financial institutions believe that more choices lead to lower costs for consumers," he said. "Card programs allow credit unions to compete with the largest of financial institutions."
At issue is a bill sponsored by Reps. Peter Welch (D-Vt.) and Bill Shuster (R-Pa.), would require credit card companies to disclose interchange rates to consumers and businesses and give the Federal Trade Commission the power to review these rates and prohibit practices deemed anticonsumer or anticompetitive. It would also let merchants give consumers who pay cash a discount and allow merchants to choose not to accept certain types of cards.
National Retail Federation Senior Vice President Mallory Duncan told the panel that "the credit card market is broken and needs to be fixed" and praised the Welch-Shuster bill for addressing the interchange fee.
Lawmakers offered mixed reactions to the testimony, and at least one said he wasn't sure which side he supported. "I'm not sure who's the David and who's the Goliath here," said Rep. Jeb Hensarling (R-Texas).
Turning to other legislation, NAFCU Director of Regulatory Compliance Anthony Demangone expressed opposition to a bill by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Joint Economic Committee Chairman Carolyn Maloney (D-N.Y.) that would have most of the provisions of the credit card overhaul bill passed in May take effect this December rather than as scheduled next February.
Demangone said that while the measure "was a response to a very legitimate need to reign in unscrupulous and deceptive credit card practices," moving up the effective date would hurt credit unions.
He added that "many credit unions don't have the resources to fully implement the letter of the changes in such a short time period."