The merchants aren't doing enough to comply with anti-fraud rules and therefore community banks and credit unions have little faith that they will comply with rules mandating that merchants don't discriminate against debit cards from small issuers.

That's the message that the two largest bank groups and the two largest credit union groups conveyed in a letter to lawmakers yesterday disputing a letter that a coalition of merchant groups sent last week.

“It is remarkable that the same groups advocating for weakened network operating rules would now hide behind them in their defense of government price controls. Merchants know that enforcing these rules among the millions in their ranks is impossible,” CUNA, NAFCU, the ABA and the Independent Community Bankers of America wrote.

The letter cited concerns raised by Federal Reserve Chairman Ben Bernanke that the small issuer exemption may not work as intended in the marketplace. The trade associations urged lawmakers to pass legislation that would delay implementation of the Fed's interchange rule.

The Federal Reserve has issued a proposed rule on interchange that is supposed to take effect in July but hasn't issued a final rule.

Bills have been introduced in the House and Senate that would delay the implementation of the rule and mandate that financial regulators, including the NCUA, study the issue.

To read the Senate bill, S. 575 or the House bill, H.R 1081, go to: http://thomas.loc.gov

To read the Fed's proposed rule, go to: http://edocket.access.gpo.gov/2010/pdf/2010-32061.pdf

Instant Insights /

Trades Dispute Merchant Claims On Interchange

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