Bankers Reject Two-tier Interchange Proposal, on Common Ground with CUs

Wednesday, January 12, 2011 12:08:00 PM

WASHINGTON - Bankers are rejecting Visa's proposal for a dual system on debit card interchange, an approach they argue will ultimately force merchants to migrate to lower-cost cards mandated for the biggest issuers.

"Despite the statutory attempt to separate out smaller banks from the price controls embodied in the Durbin amendment, the marketplace will do what it always does - drive business to the lowest cost option," said Kenneth Clayton, the senior lobbyist for the American Bankers Association. "Community banks will ultimately be harmed as a result, making it harder for them to meet the needs of their customers and local communities," he continued.

The Independent Community Bankers Association (ICBA) agreed. "A two-tier system will continue to benefit big-box retailers while leading to more consumer fees, fewer product choices, and greater consumer confusion regarding card acceptance as these merchants find ways of routing transactions to maximize their cost savings and profits and shift costs to consumers," according ICBA's senior lobbyist Karen Thomas.

All but the nation's three largest credit unions would face the same market obstacles as the community banks.

Bankers' concerns came on the heels of Visa's announcement that it will create a two-tiered system to address interchange provisions included in the Dodd-Frank Act and the proposed Fed rules on debit card transaction fees. MasterCard has yet to commit to such a system.

Credit union professionals, volunteers, and members are urged to participate in the nationwide Call-to-Action dubbed "Operation Comment" by visiting the NJCUL's Online Grassroots Action Center at http://www.capwiz.com/cuna/nj/home.
 

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