Durbin's Sparkling Interchange Fix Just Hides Legislative Substance
Interchange remains the topic du jour. Many pieces of this issue are puzzling, not the least of which is the process in which it came about. Namely, there wasn't one. The issue came up as an amendment in the 11th hour before Senate passage and was not debated nor did a hearing take place. Now the piece of legislation is heading to conference for further machinations that can only resemble something out of Upton Sinclair's The Jungle. Never mind the fact the financial services overhaul was intended to correct the problems that caused the financial meltdown to which interchange is entirely unrelated.
But, like a Christmas tree, pretty, shiny ornaments are tacked on to appease the onlookers (lawmakers). It's great if you're looking at a Christmas tree, but if it's just camouflaging the underlying substance, it's a problem.
State treasurers signed on in opposition to this amendment because it would increase the costs of the benefits paid out by the states that are now offered on reloadable prepaid cards. How might the change impact the federal government's costs in offering benefits like Social Security and Medicare? What would be the cost to the consumer-taxpayers for all the nonsavings by regulating away interchange fees?
Should the interchange amendment make it into law, Sen. Durbin thinks he will have something to bring home to his constituents-a decoration for election time. What the American public will see is the so-called hidden tax by the big, bad card issuers is gone; what no one will see is a resulting discount in retail prices. Issuers will have to make up the income somewhere, which will again land in consumers' laps, effectively creating a double tax on consumers.
The entire idea is not well-thought through, and rushing to do something for political reasons is never right. Unfortunately, that's often how things happen, particularly in Washington.
Another Washington wonder: private deposit insurance disclosure regulation. The law requiring disclosure of nonfederally insured credit unions has existed for just under two decades, so it's about time someone started enforcing it. A 2003 Government Accountability Office report stated, "Some privately insured credit unions GAO visited did not adequately disclose that these institutions were not federally insured; as a result, depositors at these institutions may not be fully informed that their deposits are not federally insured. For example, in unannounced site visits to 57 privately insured credit unions in Alabama, California, Illinois, Indiana and Ohio, GAO found that required notices were not posted in 37% of the locations."
So finally, in 2010, the Federal Trade Commission, charged with enforcement, has issued a regulation. During a period of financial tumult going back more than two years, it's about time. Problems at the $819 million Silver State Schools Credit Union in Las Vegas renewed interest in the issue of private deposit insurance, though management and American Share Insurance have said the credit union's health has improved. Consumer awareness of the type of deposit insurance a financial institution carries should weigh heavily in the decision whether to park funds there or not.
That's not to say deposit insurance options shouldn't exist, but depositors should be informed to the extent possible of the benefits and risks.
NCUA Chairman Debbie Matz issued a statement that, "In these uncertain and difficult economic times, consumers should know more about how their money is insured, and should know that the federal deposit insurance provided by the National Credit Union Share Insurance Fund is the best option for credit union members."
On the other hand, NAFCU has not come out swinging against private insurance as it has at opportune times in the past. Nobody wants to stir greater problems at the privately insured credit unions because of the potential for reputational risk. However, I would think the sheer number, assets and geographic diversity of the federally insured credit unions could smother broader reputational risk if it became necessary. Federally insured credit unions in the states with private insurance, such as the sand states of California and Nevada, could bear the brunt should the worst happen.
Finally, since Credit Union Times is always thinking ahead for our readers, we've created a special supplement covering Gen Y from how to recruit and retain them on staff to how to gain them as members. Don't be fooled; those two items are separate yet very closely linked. The supplement is for subscribers only and can be found in the digital edition of the June 9Credit Union Times available at cutimes.com.
Gen Y is tricky to figure out, in part because stereotypes never cover everyone. Whether staff or members, they'll want everything all the time and insist on praise for accomplishing even the smallest tasks. Feed this to a degree, and they'll either work their tails off for you or pout that it's not enough. Gen Y has also been stereotyped as slackers and, like any other generation, some are. Recognize this and be sure you're at least getting out of it (or have the potential to) what you put into it. Give them opportunities to learn, contribute and shine. An idea that sounds outlandish to leadership may not among Gen Yers, so as long as it's well-planned and thought out, they may surprise you. Or they may screw up, and some of that is fine. too. Like anything else, there is no manual to working with or serving Gen Y, but we hope this report serves as a good discussion starter for the future of the industry.
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