Thursday, December 23, 2010 2:03:10 PM
WASHINGTON - A nationwide interchange Call-to-Action dubbed Operation Comment is underway. Credit union professionals, volunteers, and members are encouraged to visit NJCUL's Online Grassroots Action Center at http://www.capwiz.com/cuna/nj/home/ where they can easily send the Federal Reserve Board (Fed) a pre-drafted email to weigh-in on this important issue.
The Fed has issued a proposed rule regarding the regulation of debit interchange fee income, as mandated by the Dodd-Frank Act. While the Fed has made some efforts to address a few credit union issues, the new proposal raises many serious concerns. The proposal does reference an exemption for small issuers of $10 billion or less in assets from the interchange fee rate setting but does not include provisions to enforce the exemption. As a result of the lack of enforcement for the exemption, small issuers may be subject to the fees that will be required for large issuers under the proposal. Also, credit unions with more than $10 billion in assets will be subject to the rate setting aspects of the proposal (there are three credit unions with more than $10 billion in assets).
The Fed is proposing two possible alternatives with respect to interchange fee rate setting that would apply to credit unions with more than $10 billion in assets but could de facto apply to all credit unions issuing debit cards if the establishment and maintenance of a two-tiered structure cannot be assured: (1) "Alternative 1," under which an issuer could only recover the greater of 7 cents per transaction (the "safe harbor") or its actual costs of the electronic authorization and settlement of the transaction up to a maximum 12 cents; or (2) "Alternative 2," which would allow interchange fees that vary with the value of the transaction up to a 12 cents per transaction cap.