The Senate came back last week and didn't take up legislation to delay thedelayed implementation of the Federal Reserve's rule regulatingdebit interchange rates. But the NCUA and trade groups weighed inagain about the impact on small issuers.

Andrea Heller, a spokeswoman for Sen. Jon Tester (D-Mont.), the lead sponsor of a bill to delayby two years implementation of the Fed's rule, said Tester is stillworking with his colleagues to find an appropriate bill to which hecan attach his amendment. She said that while there is growingsupport for the measure, she declined to say how many votes it islikely to get nor did she say whether there were the 60 votes linedup that would be needed to stop a likely filibuster byopponents.

A similar bill has been introduced in the House, but it islikely to wait for Senate action before taking up the measure, saidRep. Shelley Moore Capito (R-W.Va.) the measure's keysponsor.

The Federal Reserve still hasn't issued a final rule, though itis supposed to take effect on July 23. The NCUA and CUNA sentletters to the Fed last week, urging Fed Chairman Ben Bernanke todo more to protect small issuers.

Citing data compiled by her agency, NCUA Chairman Debbie Matzwrote that for federally insured credit unions with assets of $100million or less that issue debit cards, the interchange costsexceed the maximum allowed under the Fed's proposed rule.

She noted that because of this, the Fed should modify itsproposed rule to “take into consideration the unique circumstancesof smaller credit unions.”

Matz wrote Bernanke that that the median cost per transactionwas 31 cents per transaction for credit unions with assets of $10million or less and 19 cents per transaction for credit unions withassets between $50 million and $100 million. And direct costs don'tfall below the proposed cap until credit unions reach the $100million to $500 million asset range. According to NCUA data, themedian cost for those credit unions is 8 cents per transaction.

She also submitted a chart that showed that as of the CallReport data through the end of March, 181 federally insured creditunions had a net positive interchange income and 111 had a netnegative interchange income.

NAFCUtook issue with the agency's contention that the proposed rulewouldn't hurt credit unions with more than $500 million inassets.

NAFCU President/CEO Fred Becker wrote Matz that the agency “didnot take into consideration fraud costs, labor costs, facilities,equipment and other overhead costs. In fact, during the surveyprocess, one of our members informed us that they did not believeNCUA was asking the right questions to correctly determine the costof interchange.”

He reiterated the association's opposition to separating creditunions by size and contended that the “proposed price caps are badpublic policy for all credit unions.”

According to the proposed rule, the allowable costs forinterchange would be limited to no more than the issuer's allowablecosts divided by the number of electronic debit transactions onwhich the issuer received or charged an interchange transaction feein the calendar year. Or the issuer could receive debit interchangecapped at 12 cents per transaction.

In his letter to Bernanke, CUNA President/CEO Bill Cheney notedthat while Congress required the Fed to prescribe rules regardingthese provisions, there is no specific deadline for them to takeeffect. By contrast, Cheney noted, the law requires the provisionsregarding rate standards to take effect by July 21.

“Delaying the effective date of these provisions would notundermine merchants' ability to pay lower fees to large issues.Such a delay would, however, allow time for the exemption to workfor small issuers, as Congress intended, without any group ofissuers,” Cheney wrote.

Becker and Cheney both wrote lawmakers urging them to support adelay of the Fed's rule, emphasizing the negative impact on smallissuers.

However, a coalition of retailers disputed that argument in aletter to Congress. The Merchants Payments Coalition noted that itsmembers have “no contractual or practical ability to treat debitcards issued by small financial institutions differently than thoseissued by large institutions.”