Saying that "having the government fix prices in almost any venue is a bad idea,'' a bipartisan group of 13 senators urged Federal Reserve Chairman Ben Bernanke in a letter sent yesterday to ensure that when the Fed issues regulations on debit interchange fees they don't hurt small financial institutions and consumers.
The lawmakers wrote that the amendment giving the Fed this new power, which was part of the financial overhaul bill passed by Congress earlier this year, "will make small bank and credit union debit cards more expensive for merchants to accept than those issued by larger banks and would likely put them at a disadvantage compared to large issuers. Regulating interchange fees on financial institutions over $10 billion will force smaller institutions to lower their prices in order to remain competitive.''
The lawmakers asked Bernanke to "exercise the discretion granted to you to minimize negative consequences.''
Credit unions and banks fought hard to kill the interchange provision, which was introduced by Senate Majority Whip Richard Durbin (D-Ill.). It was passed by the Senate and then kept in the final version of the bill by a vote of the House-Senate conference committee.
CUNA and NAFCU have been writing letters to and meeting with Federal Reserve officials to make similar points about the interchange regulation as those made by the senators.
The letter was signed by eight Republican senators, including Sen. Richard Shelby (R-Ala.), the top GOP member on the Senate Banking Committee. Five Democrats signed the letter, including Sen. Mark Warner (D-Va.), a member of the Banking Committee who was involved in drafting parts of the financial overhaul bill.
The news of the letter was first reported by the print and online publication Politico.