The case for serving the marijuana industry and the Durbin Amendment's failure to lower merchant costs topped readers' hot topic lists over the past couple of weeks. Check out a few highlights from our website's comments section below.
This is not about us or them, banks or credit unions, it's more that the credit union risk tolerance is not designed to manage and monitor [this]. The level of risk that a compliance driven product such as marijuana places on a financial institution needs a management group with more commercial banking experience and specialty products experience.
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Concerning the minuscule number of one in 10 merchants who saw their debit card swipe fees fall, the Richmond Fed researchers admit they have no idea why. But they concede it could have been higher wholesale prices for the goods merchants sell or that they competed instead by improving services rather than lowering prices.
Consider this caveat from the study: One mathematical formula the Richmond Fed used, for instance, "fails to run given that too few merchants reported a price reduction." In other words, the number of merchants reporting their swipe fees dropped is so small that it's not clear to the researchers why some of those merchants reported not lowering their prices.
The main thing to take away from this survey, though, is that when an incredible 90% of the merchants surveyed say they saw their fees either increase or stay the same, or they didn't know, it's clear debit reform is not bringing as much competition and reduction of bloated swipe fees to debit cards as Congress intended, because the Federal Reserve acceded to the big banks in writing the rules on debit reform.
Finally, the trade association for credit unions says it "believes" merchants haven't passed along savings from debit reform but does not offer a scintilla of proof.
The trade association also says debit reform has lowered revenues for financial institutions that issue debit cards. What it doesn't make clear, though, is that all but a few of the nation's credit unions are exempt from the Durbin Amendment, which applies only to institutions with more than $10 billion in assets. "Exempt small issuers," the study says, "have been well protected."
And even the huge institutions subject to debit reform are still making a 500% or more profit margin under the Fed's rules; exempt institutions can still haul in even higher profit margins. That's the reality of the debit card market today – still uncompetitive, still unfair formerchants and consumers.
Michael Flagg
Communications Merchants Payments Coalition
Washington
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