The head of a small Minnesota credit union, who also is a director of his state league, warned Thursday that Congressional inaction on interchange has forced a complete rethink on checking and debit products for small CUs, even possible elimination of the service.
Speaking out on Wednesday’s Senate vote failing to delay interchange. David Sawin, president/CEO of St. John’s Credit Union, Little Canada, stressed that while his own CU has no plans for now to alter its checking product lineup, the consequences of Congressional failure on the cap are widespread for the industry.
“All credit unions will be watching closely to see how the implementation of this new rule plays out in the marketplace but as a $19 million credit union, we stand to lose $22,000 per year in interchange income and if that happens we will need to decide how to respond,” declared Sawin.
“Do we impose fees as the big banks have been doing or do we put restrictions on the debit cards to rein in the fraud looses,” asked Sawin. “Or do we eliminate the checking program altogether? I am sure that if the full impact of this damaging legislation hits small credit unions, there will be some of all three, and the consumer will be the one that pays the price in the end.”
Sawin, who is a director of the Minnesota Credit Union Network, said he was uncertain how many other CEOs of small CUs share his viewpoint but that “I’m concerned that the carve-out for small credit unions and community banks will not work and that market forces will out us in a position of having to match the very low interchange rates of big banks in order to compete. Since large retailers like Wal-Mart are very sophisticated and dedicated to reducing costs, I am confident that they will work to deteriorate the two-tier system.”
Sawin, who is a member of an ad hoc networking group of Twin Cities CEOs, known as CU Partners, said the interchange issue has long worried CUs and now the income loss becomes pivotal. In his league work, Sawin said his own CU for months has sought to help struggling CUs including faith-based CUs like his.