Trades Focus on Interchange During Reg Reconciliation
WASHINGTON -- For credit unions, the upcoming House-Senate conference committee on the financial regulatory overhaul is coming down largely to interchange fee regulation.
That's the major difference between the House and Senate regulatory overhaul bills that could directly impact the bottom line of credit unions. As a result, CUNA and NAFCU are lobbying intensely both on Capitol Hill and at the grass roots level.
The interchange amendment, which was inserted into the Senate bill passed on May 20, authorizes the Federal Reserve to ensure that debit card fees are "reasonable and proportional" in relation to processing costs. It excludes credit unions and community banks with assets of less than $10 billion. It also allows merchants to set a minimum or maximum amount for each transaction and let them offer additional discounts for using a certain type of card or cash.
The issue, which wasn't addressed in the version passed by the House last December, isn't a top priority for the Obama administration and wasn't in its original proposal.
"We frankly haven't taken a formal position on it," Michael Barr, assistant treasury secretary for financial institutions told reporters at a May 26 briefing.
While supporters of the amendment are framing it as pro-consumer and likely to reduce retail prices, CUNA, NAFCU and representatives of both large and small banks say it would hurt both the health of financial institutions and the availability of consumer credit.
Credit unions would "be forced into an impossible decision-either raise costs for members or stop issuing debit cards altogether," NAFCU Executive Vice President Dan Berger wrote lawmakers.
He noted that the exemption for smaller credit unions isn't helpful because merchants would discriminate in favor of price-controlled products from larger institutions, and the "debit card in your wallet from your credit union will now be viewed as second-class by merchants and the American consumer."
CUNA Senior Vice President John Magill predicted there will be a "brutal uphill fight," during the conference committee to kill the amendment.
Lobbyists for retailers have been waging an intensive campaign to get interchange regulation changed.
Therefore, it is shaping up to be a title bout of Goliath vs. Goliath.
The political action committees of CUNA and NAFCU have contributed money to the campaigns of all of the Senate's representatives on the conference committee. The House hasn't named its conferees, but the lawmakers most likely to be picked are among those who have received money from the PACs.
However, many of those members have also received money from the retail lobby. The 34 political action committees affiliated with the retail industry have given $3 million to federal candidates since 2009, according to data compiled by the Center for Responsive Politics.
The House and Senate versions also differ on other issues, including the structure of the new entity that will regulate consumer financial products.
In response to a question from Credit Union Times, Barr said the Obama administration doesn't have a preference as to whether the new agency to regulate consumer financial products is an independent entity as spelled out in the House bill or is housed in the Federal Reserve as spelled out in the Senate bill.
"Both versions are paths to real, meaningful independence," he said.
In both the House and Senate versions, credit unions with assets of $10 billion or less-all but three credit unions in the country-would not be subject to examinations by the new regulator but must comply with its rules. Only Navy Federal, Pentagon FCU and State Employees Credit Union would be subject to examination by the new regulator.
The trades haven't weighed in on how much additional oversight Congress should have of the Federal Reserve.
But Deputy National Economic Council Director Diana Farrell told reporters at the briefing that the administration favors the Senate language, which calls for a one-time Government Accountability Office audit of the Fed's loans during the recent financial crisis. By contrast, the House version allows for recurring audits of the Fed.
Lobbyists for CUNA and NAFCU said they and the banks will work to persuade conferees to change a provision in the Senate version they say would prevent many financial institutions from offering wire transfer services. The associations say the provision would hurt U.S.-based financial institutions because it would classify certain transfer services-such as Fedwire and ACH-as remittance services and make institutions that provide them liable for disclosing all costs up front.
CUNA, NAFCU and the NCUA are also going to push for language that would include the chairman of the NCUA in the council of regulators that could make decisions on systemic risk and hear appeals of rules by the new consumer financial regulator. It is in the House version of the bill, but not the Senate's.
Those groups and the agency will have plenty of company. The administration predicts that the lobbying frenzy, which has been extremely strong throughout the legislative process, could get even stronger during the conference committee negotiations.
Farrell predicted that lobbyists would be all over Capitol Hill and those opposed to the regulatory overhaul will use "scare tactics" to try to make their case.