Refuting a key claim of credit unions and community banks, a coalition of retailers told lawmakers that it would be illegal and impractical for them to treat debit cards from small issuers differently.
The Merchants Payments Coalition, which represents 20 retail groups, noted that its members have “no contractual or practical ability to treat debit cards issued by small financial institutions differently than those issued by large institutions.’’
They pointed to an existing rule that imposes a $5,000 per day fine for violating the ban and noted that merchants can’t always differentiate between big-bank and small-bank cards, since customers often swipe the debit card themselves.
The coalition sent the letter to Rep. Shelley Moore Capito (R-W.Va.), with copies to every other member of Congress. She is sponsoring legislation that would delay the implementation of the Federal Reserve’s interchange rule by one year. A companion bill in the Senate would delay implment6ation by two years.
In pushing for delaying the implementation, a key argument for credit unions and banks is that the debit cards issued by smaller issuers could be disadvantaged since they would be more expensive for merchants because of the two-tiered pricing structure.
Federal Reserve Chairman Ben Bernanke told a Senate panel earlier this year that that could be one of the results of the rule.
The Fed has issued a draft rule but it has been delayed in issuing a final rule. The rule is supposed to take effect in July.
According to the proposed rule, the allowable costs for interchange would be limited to no more than the issuer's allowable costs divided by the number of electronic debit transactions on which the issuer received or charged an interchange transaction fee in the calendar year. Or the issuer could receive debit interchange capped at 12 cents per transaction.