Credit union trade associations are disputing the results of a Federal Reserve report that found debit interchange income hasn’t decreased for institutions with fewer than $10 billion in assets since the Durbin amendment exempted them from caps mandated by the Dodd-Frank Act.
The Fed said Thursday in a release that data it collected from payment card networks reveal that all of the networks provided a higher average interchange fee to exempt issuers than non-exempt issuers in 2012.
The average interchange fee per signature debit transaction for exempt issuers was slightly more than double that for non-exempt issuers. The average interchange fee per PIN debit transaction for exempt issuers was 1.3 times greater than that for non-exempt issuers. Exempt issuers received $7.4 billion in total debit card interchange revenue in 2012, compared with approximately $5.3 billion in debit card interchange revenue in 2009.
That’s not what members are telling CUNA and NAFCU, according to releases from the two organizations. Both groups lobbied against the interchange cap, saying that even exempt institutions would receive less interchange income due to market forces.
NAFCU said in a release it has found that, for its members, the median interchange fee – on its face and as a percentage of transaction amount – has decreased since the rule took effect. “Credit unions continue to tell us that they are feeling the pinch of this unfortunate rule in both loss of fees and increased compliance burden,” said NAFCU President/CEO Fred Becker. CUNA said it also has heard a different story from its members, and said it is speaking with Fed officials to learn more about the report, which was gathered from survey responses from payment card networks and 102 small depository institutions. The number of credit unions that participated in the survey is not apparent from the information released, CUNA said.
"These results are welcome in the short term for credit unions across the country, but we continue to have grave concerns about debit interchange income for credit unions over the longer term, and question whether these results will stand over time," President/CEO Bill Cheney said. The Fed said the survey also revealed that most small issuers said they did not incur significant compliance costs to meet network exclusivity provisions of the rule. Only 16% of respondents said they incurred compliance costs to enable two unaffiliated debit card networks on each debit card.
Those issuers that incurred compliance costs reported an average initial cost of 72 cents per card and average projected ongoing annual costs of $1.19 per card to come into compliance. Only three of the small issuers that responded to the survey said their cardholders complained of having their debit cards discriminated against by merchants, the report said, and the results did not clarify if the complaints were directly due to the fact that the cards were exempt from the interchange fee standard.
The Government Accountability Office and the Federal Trade Commission have also reported that exempt institutions have not experienced large declines in interchange income since Regulation II took effect.