I don’t think it’s too much of a stretch to say that ourindustry’s fight against a Draconian interchange fee cap reachedepic proportions in the weeks leading up to the June 8 vote in theSenate on the Tester-Corker amendment to delay and study the Fed’sproposed rule.

Credit unions fought valiantly. While not getting the 60 votesrequired to overcome a filibuster, we convinced a large number ofsenators to reconsider their prior vote through a groundswell ofgrassroots outreach not seen in the Capitol in many years.

In fact, our efforts yielded well over 100,000 contacts tosenators and a dramatic increase of support in the Senate for theTester-Corker amendment. Credit unions’ efforts to combat theretailers and the poorly conceived interchange provision in theDodd-Frank Wall Street Reform and Consumer Protection Act werecommendable, and it was one of our greatest assets in thefight.

While we were deeply disappointed in the outcome (achieving amajority, but falling six votes short needed to break Sen. Durbin’sfilibuster and pass the amendment), we are not simply sitting idlyby. From the beginning of this fight, I suggested that creditunions needed to have a Plan B, a contingency plan they could putin place no matter what the outcome of the vote.

It would be fair to say that being prepared is just secondnature to me, and we at NAFCU also have our Plan B. Once the Senatevote occurred, we immediately appealed to the Federal Reserve andPresident Obama to help minimize the negative impact on creditunions and their members.

We are hopeful that they will recognize the folly of thisgovernment-imposed price cap and the necessity of adequatelycompensating debit card issuers like credit unions to cover thecritical costs of fraud and data security as part of theinterchange fee and making the two-tiered system that would protectsmall issuers effective.

For now, all eyes are on the Federal Reserve, and there isrampant speculation as to what its final rule will look like with afinal ruling expected soon–quite possibly before this article ispublished. Because the Fed received comment letters that are quitedetailed and extensive and the issue raised by the comments arecomplex and difficult to address, we believe the Fed will modifyits rule—in some fashion.

By how much remains to be seen. Presumably, there will be anupward increase in the transaction fees institutions can charge.However, we remain concerned that it will not be enough to fullycover the costs of interchange for credit unions. We do hope thatthe Fed takes to heart our plea that fraud costs be included. As wehave argued many times, credit unions are the ones stuck footingthe bill when a retailer like Michaels not only has a data breach,but essentially absolves itself of any responsibility for the loss.Those costs should be reflected in the Fed’s rule.

We hope that Fed Chairman Bernanke’s expressed concernsregarding smaller financial institutions and the proposed exemptionwill help structure the final rule in a way that affords creditunions greater protection. Furthermore, given the Fed’s delay inputting forth a final rule, we also hope it will put forth asimilar delay in its implementation when it is released.

Another factor that could have a major impact on interchange isthe TCF National Bank lawsuit challenging the Fed’s rule and therelated Dodd-Frank provisions. Even as I write this column, we areanticipating the results of the recent oral arguments appealing theloss of the preliminary injunction. Additionally, we believe thatonce the Federal Reserve issues the final rule, there is potentialfor other litigation as well.

In the meantime, as noted above, credit unions need to have acontingency plan. To that end, NAFCU offered a webcast on May 19with Dave Schneider, president of PULSE, “The Future of DebitCards: How to Prepare for Significant Losses in InterchangeIncome,” that addressed some possible courses of action given thelooming changes in debit card interchange fees that credit unionscan still access. Here are some of the recommendations:

• Know your membership and its usage trends.
• Use survey data to assess your offerings in concert withyour pricing and costs.
• Segment your services to target the different needs of yourmembers.
• Determine if you need to make any adjustments toyour portfolio to increase revenue and improve your memberloyalty.

As this issue continues to unfold, you can expect that we willremain in the forefront of providing credit unionsthe additional tools and expertise needed to effectively servetheir members and manage their bottom lines.

Looking ahead, I would encourage credit unions to draw from themany lessons the battle on interchange has afforded us. As anindustry, we should take great pride in our ability to rally thestrength of our numbers nationwide.

Also, we should note who our congressional champions were inthis process. There will be other legislative fights, and it wouldserve us well to support those elected officials that helped us onthis critical issue and keep in mind those who did not.

Interchange is not the only threat to credit unions. Preservingthe federal tax exemption and contending with increased governmentregulation represent sizable concerns in the near future. We mustnot retreat. On the contrary, we should be emboldened to fight evenharder as other issues confront us.

Fred Becker is president/CEO of NAFCU.