Credit unions' reaction to the recent data breach at arts and crafts retailer Michaels could be impaired under the pending debit interchange cap, CUNA has told U.S. senators.
The retail chain has not revealed all the details about the breach yet, but has said that stores in 20 states were impacted. That broad geographical footprint has given debit cap opponents an opening to make another argument against the interchange measure.
In a letter to senators from states where the fraud occurred, CUNA noted that credit unions generally work with members harmed by data breaches at retailers which, generally, do not help them and that CUs can do this in part because the flow of interchange income helps cover the costs of fraud.
But once an interchange cap goes into place, that is likely to change, CUNA warned.
“While most credit unions are exempt by statute from the regulation, there are legitimate concerns regarding whether this exemption will work,” CUNA wrote. “In fact, Federal Reserve Board Chairman Bernanke has questioned on multiple occasions the effectiveness of the statutory exemption.
“If the rules are permitted to go into effect, exempt credit unions and other debit card issuers may be forced to increase fees to consumers to cover the loss of debit interchange revenue. This will make debit cards more expensive and potentially less available for some consumers.”