We would like to thank you for the action you took to write or call your U.S. Senator regarding the June 8 vote on the Tester-Corker amendment. Unfortunately, the U.S. Senate fell six votes short of the 60 votes required to pass this measure to stop and further study the regulation of debit card interchange fees. While this is profoundly disappointing, our trade organizations did a great job representing our industry and the high level of grass roots activity was encouraging as well.
The impact of the Durbin interchange amendment to the majority of credit unions depends on how the $10 billion exemption is handled within the Fed rules, and the requirements for network implementation. The task now falls back on the Fed to finish the rule-writing process.
Fortunately, there is some clarity to the path forward. We expect final rules from the Fed within the next two weeks. That will provide a very short time frame in which to implement by July 21; in fact, the time frame may be too short to adequately perform end-to-end testing within the payments system. Regardless, the Fed will have to deal with this.
We believe all networks will implement a two-tier system maintaining interchange at rates near the current $0.44 per transaction average for financial institutions under $10 billion in assets. Although this pricing is probably not sustainable long term, there is likely to be little or no decline for the remainder of 2011. Your interchange revenue will not fall off a cliff the day after July 21.
All of the large banks have either re-priced their checking accounts or will shortly. There will be a window of competitive advantage for credit unions under $10 billion to move market share.
In addition, it is now clear that the network exclusivity provision will become effective October 21. Credit unions for which this is a consideration will need to move forward quickly. The TCF lawsuit will have standing effective July 21 and it will begin to move through the courts. We doubt there will be an injunction or stay.
CO-OP Financial Services is committed to helping you prepare for the changed regulatory environment, whatever form it may take. We urge you to continue to call upon us as a strategic resource in your planning for the Fed rules.