WASHINGTON—Sharing concerns about potential changes to interchange, NAFCU wrote to the Senate Banking Committee ahead of its hearing to examine the Federal Reserve’s Semiannual Monetary Policy Report to Congress,released earlier this month.
Fed Chairman Jerome Powell testified before the Senate on Wednesday where he delivered the report, and is testifying before the House today.
In the letter, NAFCU Vice President of Legislative Affairs Brad Thaler outlined the trade group’s concerns about recent efforts by merchants to have the Fed make changes to its interchange regulation (Regulation II) and told Congress the electronic payments system is a “two-sided market, with consumers on one side and merchants on the other” where both benefit from the arrangement.
Restating what NAFCU called the “useful purpose of interchange fees,” Thaler noted that new caps or restrictions, like those set under the Durbin amendment that he said would “only hurt community institutions such as credit unions as well as the American consumer.”
NAFCU further noted that under the Durbin Amendment, which imposes a cap on debit interchange fees for covered banks and credit unions, defined as those with assets of more than $10 billion, the Fed is charged with carrying out routing network requirements for debit cards and has done so with Regulation II.
Increased Burden
NAFCU reminded the Fed has recently proposed reopening Regulation II, to which NAFCU noted it has urged the Fed to reconsider the request, stating that it would only increase regulatory burdens associated with the Durbin Amendment.
NAFCU added that it has long underscored the importance of interchange fees for credit unions, which it said helps provide low-cost, and sometimes free, checking accounts for their members.
“According to data from the Fed, the interchange price cap has taken away $6 to $8 billion in revenue yearly from credit unions and banks, and are one of the leading contributors to the decline in free checking accounts offered by banks and credit unions, per a Government Accountability Office (GAO) study,” NAFCU stated.
‘Precipitous Erosion’
“Credit unions have seen a precipitous erosion of per-transaction debit interchange income,” added Thaler. “While the intent of the ‘Durbin Amendment’ was to prevent card-issuers and networks from unfairly charging merchants higher rates and thus, passing higher costs along to consumers, the evidence overwhelmingly suggests that it has not helped everyday Americans.”