Try this simple bit of arithmetic to see how much the Durbin interchange amendment to the financial regulatory overhaul bill will hurt your credit union:
$30 x the number of debit cards you issue
So, if there are 10,000 active debit cards out there with your credit union’s name on them, you will lose somewhere in the neighborhood of $300,000 in interchange income each year if the Durbin amendment isn’t stricken from this bill.
Mad yet?
We at CO-OP certainly are. In fact, we’ve pledged $75,000 to CUNA to help them mount one of the biggest grassroots efforts since The Credit Union Membership Access Act of 1998, or H.R. 1151.
Remember that?
That bill could have paralyzed credit unions, and the Durbin amendment has the potential to do some major harm, too. It won’t just hurt your credit union, though. Consumers are likely to be the biggest losers if interchange is regulated in the way that Durbin intends:
- Merchants are likely to place multiple restrictions on their acceptance of debit cards, taking away the choices that consumers currently enjoy.
- If credit unions decide to accept lower interchange rates so that their cards are accepted, many of them will need to assess fees on debit card transactions in order to cover their costs.
- Merchants have not promised to pass the savings on to consumers. They’ve actually said that they would offer other benefits “like free gift wrapping,” according to the head of the National Retail Federation.
What can you do?
- Write a letter: CUNA–Take Action
- Get your members to write letters: Some credit unions have seen as many as 10 percent of their members heed their call to action.
- Hike the Hill: Join CUNA on June 9 in Washington, DC. See: CUNA-Hike-the-Hill
Finally, to learn more, visit the following Web sites:
Electronic Payments Coalition: EPC Facts on Interchange
CUNA: CUNA Interchange FAQs
Unfortunately we are once again facing a very short sighted proposal affecting the financial services industry. The facts the proposed interchange amendment have been based on are not only one sided but they are only a small part of the overall picture. It seems very convenient that the merchants are getting guaranteed payments with little to no risk and the issuers are supporting all the card issuance expenses, maintenance expenses, fraud related expenses, and yes we also have transaction processing expenses.
The merchants seem to have forgotten that the purpose of interchange is to assist in offsetting the issuers costs associated with card issuance/operating expenses and make it feasible for these cards and guaranteed payments to be available not only for the consumer but for the merchant. It seems it has also been overlooked that with card payments merchants have had a significant reduction in cash handling which reduces their operating costs and cash losses, they have reduced the number of checks they paying to process in addition to reducing the internal operational overhead associated with accepting and processing checks in addition to reducing the potential for returned checks and the need to collect on them. Has card acceptance improved the amount of time it takes a merchant to process a cash or check transaction? So, while merchants pay interchange they also have a number of benefits that go with the privilege of accepting cards.
It is unfortunate that if this amendment is passed consumers will once again end up paying the price for a short sighted proposal and lack of understanding by those representing us within our government.
Well said, Shirley. We at CO-OP are amazed at the misconceptions that exist within the minds of those who are writing legislation on this topic. Today, we got a chance to set the record straight, if only just a little. A few of us within CO-OP’s senior management team spoke to a very knowledgeable fellow from the U.S. Treasury Department who was searching for the winners and losers in this interchange value chain.
Several times during the conversation, we reminded this gentleman that interchange is an exchange of funds from the merchant to the issuer, but he kept circling back to a need for “transparency” to the consumer. He even went so far as to say that if this amendment passes, consumers would be able to shop for the cheapest card. Of course, we were quick to dispute that point, explaining that the consumer will definitely NOT be the winner. On that point, he acquiesced, saying that he agrees that consumer’s checking account fees will go up if the Durbin amendment passes.
It was a small victory, but at least the questions are being asked.
Thank you for taking the time to write.
Thank you for your comment, Dick. With Insight Vault, CO-OP is dedicated to generating a true dialogue on industry issues, and dialogue includes different points of view. Similar governmental action in Europe and Australia on behalf of merchants has had mixed results, and a report on interchange legislation by the US GAO found any positive impact for consumers difficult to measure. Particularly unfortunate, merchants have not promised to pass on savings to consumers. As of June 29, it does appear that the Durbin amendment will be included in the final bill, slightly modified in conference. In spite of this, we do have an abiding faith that the credit union movement will continue to provide excellent service to its members, as NFCU is obviously providing to you.