Credit Unions Detail the Damage They Say Interchange Cap Will Cause
A few credit unions have begun to detail the impact of the Federal Reserve's proposed cap on debit card interchange, telling the agency that its proposed rule will sharply hurt their bottom lines.
"We have estimated that we stand to lose $402,000 a year in interchange income from our members' debit card transactions if this Durbin bill is not amended," wrote Eileen Rivera, CEO of SkyOne Credit Union. "Our net income was only $84,000 in 2010. We will find ourselves in a position of significant negative earnings if we don't reverse this piece of the bill."
"One of the major costs associated with debit cards is fraud," wrote Tabitha McDonner, a vice president with Southwest Airlines FCU in a comment that made a similar point. "Financial institutions bear the cost of fraud that occurs with debit card usage. Merchants are currently liable for only a small portion of fraud that occurs-mostly online/mail/phone purchases and have zero liability otherwise. Financial institutions use the interchange income to protect consumers from incurring fraud losses. That cost factor was not considered in the current proposal," she added.
The comments from credit unions and industry trade groups outlined concerns that run counter to the optimistic assertions that have been spelled out by the cap's author.
In addition, there were a number of comments from cap supporters as well, many of whom own and operate small businesses that pay interchange fees.
John Houseman wrote the Fed to describe the impact interchange fees have on his small gas station and convenience store in a small town of about 18,000 people.