For the Federal Reserve employees who are diligently reviewing comment letters regarding the proposed regulation on interchange, it might have seemed like they were living in the movie Groundhog Day. As we go to print, nearly 250 comment letters were posted to the Fed's website regarding the proposal. There was also this little nugget:
"The board has received more than 2,124 form letters on this proposal that are not being posted. The attached file (39.7 KB PDF) contains examples of the content of six different form letters."
Astro-turfing might be your first reaction. Not real grassroots you say? What nefarious group of dubious character might be responsible for this deluge of data? Credit unions!
CUNA has a well-intended letter on its site for credit union executives and others to use for a letter writing campaign, encouraging the Fed to do what it can to ensure smaller debit issuers aren't disproportionately harmed in the implementation of the statutorily required regulation. CUNA's purpose is to represent its members and rally them around important causes. A potentially 15 to 47 basis point loss based on the proposal is significant and reason to rally the troops. But credit unions, which pride themselves on their authenticity lose a little of that with situations such as this.
CUNA, as with all trade associations, is also supported by dues to be experts on issues like the interchange cap and dual system regulation. Providing some talking points for the letters is entirely appropriate. Busy credit union executives don't have the time to understand everything.
But when you're talking about such a hit to credit unions' bottom line, an effort at personalization is in order. Grassroots efforts must be real and genuine, even if helped along with some talking points. When the Federal Reserve notes that thousands of letters have come into them, all basically the same, it dilutes their meaningfulness. Having many letters expressing the same sentiments can be important to shifting public policy concerns in your favor but having many letters with relatively identical wording is not.
Another thing to keep in mind is the Federal Reserve Board members have 14-year terms. One of the reasons behind that is to take the politics out of their decision making so they aren't at the whim of elected officials. In this way, they are hopefully able to make the most objective decisions for the right reasons.
However, in rule making, their hands are tied to statutory requirements. And, as Senate Minority Leader Mitch McConnell told Credit Union Times, it's doubtful whether either the Senate or the White House will allow a repeal of the Durbin amendment to go through. As you've experienced in your time as credit union advocates, good public policy can be shoved aside for political interests.
In other news, Mission San Francisco Federal Credit Union has not let up on its request for donations to help it plug up the leaking dam. The credit union has experienced high delinquencies in the economically distressed area it serves. Not surprising, really. Combining a low-income membership, which generally tend to present extra challenges for credit unions, and California's hard-hit economy makes for a tough situation.
But there are practical realities to running a member-owned, not-for-profit financial institution as you all are well aware. It needs to be supported by the membership base. While it is certainly legal for Mission SF to request and receive secondary capital deposits, that should not be the only thing keeping the credit union alive.
As First Entertainment CU President/CEO Charles Bruen wrote in his blog when this donation drive first made news, credit unions are not charities. And while everyone in the industry wants to salvage as many credit unions of all sizes, it is not going to be possible.
The industry can't save small credit unions just because they're small. Mission SF I'm sure has done many wonderful things for its membership. The credit union offers credit-building loans, financial counseling, youth services, microloans for business, personal loans and auto loans, and many other products and services.
The credit union has not made the case that these acts will stop if it merges with another credit union. The credit union is talking about needing an angel. Possibly that angel is a larger credit union that can absorb the special needs of an economically distressed area. Maybe that credit union could provide even more services and more conveniently.