WASHINGTON - Credit unions took their case for keeping the status quo on interchange fees to Capitol Hill last week as House and Senate conferees began their effort to reconcile the different versions of the regulatory overhaul bill.
Executives and members took a two-part approach when making their argument: the impact of lower fees on their bottom line and the impact of higher costs on their members.
SchoolsFirst FCU in Orange County, Calif., focused on the effect of higher lower interchange fees on their members and brought five of them to Washington to make their case.
"Because of the budget crisis, our members are losing jobs or having their salaries cut because of furloughs. The last thing they need is more fees, and that's what will happen if we lose some of the revenue we get from interchange fees," said Shelly Berryman, the director of member advocacy at the 401,000-member $7.8 billion credit union.
Kentucky Employees Credit Union President/CEO John Graham said he emphasized the possible job losses at his $53 million, 8,100-member credit union in Frankfort, Ky. He said the credit union could lose between $32,000 and $65,000 in fees each year, and that could cause him to lay off two staff members. KECU has 24.5 full-time equivalents.
"We can't charge higher fees if larger financial institutions don't because it will hurt us competitively. And we fear there is no way to make up the fees," he said.
The interchange amendment, which is in the Senate version of the 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 certain cards or cash.
CUNA organized a "Hike the Hill" that it said would attract nearly 1,000 participants. As of the afternoon of June 2, CUNA had made 375,000 e-mail, snail mail and fax contacts in the previous two weeks.
NAFCU said they expected a "substantial" presence in Washington but said it was waging an extensive e-mail and phone campaign.
CUNA and NAFCU contend that if the amendment were included in the bill it would create a two-tiered system in which smaller card issuers would be disadvantaged.
"It will cause big box stores to make money on the backs of consumers because they won't pass the savings from lower fees on to consumers. That's a strong part of our case and that is resonating with members of Congress," said Dan Berger, NAFCU executive vice president of government affairs.
National Retail Federation Vice President Craig Sherman said if the amendment is included in the final bill, retailers wouldn't change their policies in a way that would hurt credit unions.
"The Visa/MasterCard 'honor all cards' rule will still stand, so retailers will still be required not to discriminate," he said.
Sherman also disputed Berger's contention that consumers wouldn't benefit from lower inter- change fees.
"Retailers that compete on price will lower their prices while those that emphasize service will probably increase the number of employees to improve customer service," he said.
Banks, credit unions and card companies, through the Electronic Payments Coalition, launched television and print advertising campaign to make their case, as did the retailers.
Before embarking on their visits with lawmakers, several hundred participants gathered Tuesday, June 8 at Union Station to nibble on hors d'oeuvres and listen to speeches from CUNA leaders.
"I am not leaving without a fight. We're here to do what's right," CUNA President/CEO Dan Mica told the group.
Mica, who is leaving office next month, joked in an interview that "I thought I would spend my last weeks packing up my office and looking at old pictures. But then this came up, and it is so important that we take our message to Congress because we wear the white hats."
Ohio Health Care FCU Controller Danielle Chatfield-Beres, who took turns driving with several colleagues to get here, said in an interview that the amendment would cause a revenue loss that would force her to cut expenses.
"Either way our members would be disadvantaged," said Chatfield-Beres, who estimated that her $40 million credit union could lose between $150,000 and $190,000 in interchange fees.
But Elizabeth Warren, Harvard law professor and consumer advocate, said the amendment will increase transparency to consumers and force card issuers to design their products in a way that consumers can understand the associated costs.
"I believe in every form of transparency in pricing credit to consumers," Warren said in response to a question from Credit Union Times during a conference call with reporters organized by Americans for Financial Reform.
Warren, who in a scholarly article proposed the idea for the new entity that is a key part of the regulatory overhaul bill, said she is "quite skeptical" of the argument that credit unions and banks have made that any savings from reduced interchange fees won't be passed along to consumers.
President Obama said he hopes Congress will finish its work on the regulatory overhaul bill by the time he leaves for the summit of world leaders that begins on June 20 in Toronto.