Trades and CU Execs Wage Capitol Hill War in Interchange Restrictions
From the halls of the Treasury Department to town meetings in the states, credit unions and their allies began the last stages of the fight to kill an amendment to the regulatory overhaul bill that would give the Federal Reserve the power to regulate interchange fees.
CUNA President/CEO Dan Mica and other association officials made the case in a June 1 meeting with Assistant Treasury Secretary Michael Barr and presented a letter saying the change could "result in direct and substantial reductions in credit unions' net worth."
NAFCU officials had phone and e-mail exchanges with senior Treasury Department staff members.
Lobbyists for both groups declined to characterize the nature of the conversations or say if they had a sense whether the Obama administration plans to take a position on the amendment.
A Treasury Department spokesman did not return calls seeking comment.
The amendment, which is in the Senate version of the regulatory overhaul bill but not the one passed by the House, 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 lets them offer additional discounts for using a certain type of card or cash.
House and Senate conferees will meet later this month to iron out the differences in the bills. And those lawmakers are the subject of intense lobbying on the interchange issue.
Credit union executives also wrote and met with lawmakers during the recess to convey their concerns about the measure.
"Since we run this service [debit cards] at near break-even, the increased costs that will result from this legislation will almost certainly be borne by consumers in the form of fees for services that they now receive free of charge," said Barry Shaner, Directions Credit Union president/CEO in a statement following meetings with lawmakers.
According to CUNA, about 5,600 credit unions offer ATM or debit card programs. NAFCU has estimated that credit unions could experience a $1.6 billion loss of income if the Fed were to cut interchange fees.
Executives from both CUNA and NAFCU member credit unions are coming to Washington this week to lobby legislators in person.
Mica told a conference call of credit union executives that he is "not confident we can win this, but that doesn't mean we shouldn't do our best."
NAFCU Executive Vice President B. Dan Berger said although it is a difficult fight, his group is getting a sympathetic reaction from some lawmakers, especially when its members point out that the normal legislative process was short circuited.
"We are hearing concern that an amendment of this magnitude was passed at the end of the process, without any previous hearings on the Senate side," he said in an interview.
Credit card companies have enlisted state treasurers who say that cutting interchange fees would limit card issuers' abilities to give states access to prepaid cards to distribute benefits at little or no cost. The companies use proceeds from interchange fees to offer the cards to state governments.
"The cost savings was achieved as a result of moving from check to electronic distribution of benefits to states and their taxpayers," Nebraska State Treasurer Shane Osborn wrote the House Financial Services Committee.
He said the interchange amendment in the Senate version of the regulatory overhaul bill would "drastically alter this equation."
Supporters of the amendment, backed by groups representing retailers, are redoubling their efforts to save it in the conference committee.
Senate Majority Whip Richard Durbin (D-Ill.), who sponsored the interchange amendment, wrote a letter to the CEOs of MasterCard and Visa urging them not to tell small banks and credit unions that passage of his amendment would result in higher fees.
"The only way that small banks or credit unions could experience interchange rate reductions or be discriminated against is if your companies decide to cut small bank interchange rates and rescind your operating rules that currently prohibit discrimination between card-issuing banks," he wrote.
Durbin added that if Visa and MasterCard coordinate punitive actions, they would be engaging in restraint of trade.
But CUNA and NAFCU both said their members had not received threats from the card companies.