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Legislative Update with Jay Kruse by Jay Kruse, Chief Advocacy Officer If you have been paying attention to The Memo and your emails over the last few weeks you are well aware of the multiple advocacy efforts taking place to combat retailers attempts to avoid accepting responsibility for losses due to fraud and theft, by capping or reducing interchange fees charged by financial institutions or card issuers. Interchange regulation and caps are nothing more than government price controls, where legislation sets the fees that one private industry can charge another industry. Many retailers and other interchange opponents focus on the cost of electronic payments while ignoring the convenience they provide, and the problems related to only accepting cash payments. Electronic payments are safer, more efficient, and lead to customers spending more money. Legislators are actively discussing the possibility of changes to credit interchange in addition to the proposed changes to debit card routing requirements, also known as Regulation II, by the Federal Reserve. Legislation will not solve the interchange dispute as evidenced by the continuing fight over Senator Durbin’s (D-IL) debit price controls which were controversially passed by Congress in 2010. But will retailers be happy until interchange is at zero? The proposed changes in Reg II and the yet-to-be released legislation could lead to a sizeable decrease in interchange income combined with increased compliance costs which could have a considerable effect on credit unions’ net income and their members spending power. Quantifying the costs and return on credit card programs and understanding the impact of potential regulations on credit unions and their members is critical to our proactive advocacy efforts. We have requested and urged all DakCU members to participate in a CUNA led survey, sharing their interchange related data, that will be kept confidential and shared in aggregate with Congress and leveraged during our Fall Hike the Hill. We definitely understand that this request will likely require some additional work for you to collect this important data from your systems, and we appreciate your willingness to put in some extra time to protect your members and their credit union. Begin the Survey. We also have an active “Call to Action” regarding the Fed’s proposed changes to Reg II, asking members to reach out to the Fed expressing their concerns over the central bank’s proposal, which aims to place additional limitations on payment card network restrictions. While the Fed Board asserts that these proposed amendments are merely “clarifications,” we strongly disagree. We believe the changes are extremely substantive, and if finalized, will result in significant additional regulatory burdens being placed on credit unions and other financial institutions. This “Call to Action” posted in CUNA’s Grassroots Action Center includes a sample comment letter to provide credit unions with an easy tool to send in their comments. It is highly recommended to add any details specific to your credit union to supplement the talking points contained in the letter. However, please do not change the Subject Line of the sample as the Federal Reserve Board is very particular about what needs to be included, and we want your comment letter received and reviewed. Finally, be sure to check out Amy Kleinschmit’s Friday Memo article for more in-depth details on this proposal and subsequent “Call to Action.” Please help us by reaching out to the Federal Reserve Board here: Call to Action! As always, don't hesitate to contact me at jkruse@dakcu.org with any questions or comments.
Legislative Update with Jay Kruse
by Jay Kruse, Chief Advocacy Officer
If you have been paying attention to The Memo and your emails over the last few weeks you are well aware of the multiple advocacy efforts taking place to combat retailers attempts to avoid accepting responsibility for losses due to fraud and theft, by capping or reducing interchange fees charged by financial institutions or card issuers. Interchange regulation and caps are nothing more than government price controls, where legislation sets the fees that one private industry can charge another industry. Many retailers and other interchange opponents focus on the cost of electronic payments while ignoring the convenience they provide, and the problems related to only accepting cash payments. Electronic payments are safer, more efficient, and lead to customers spending more money.
Legislators are actively discussing the possibility of changes to credit interchange in addition to the proposed changes to debit card routing requirements, also known as Regulation II, by the Federal Reserve. Legislation will not solve the interchange dispute as evidenced by the continuing fight over Senator Durbin’s (D-IL) debit price controls which were controversially passed by Congress in 2010. But will retailers be happy until interchange is at zero?
The proposed changes in Reg II and the yet-to-be released legislation could lead to a sizeable decrease in interchange income combined with increased compliance costs which could have a considerable effect on credit unions’ net income and their members spending power. Quantifying the costs and return on credit card programs and understanding the impact of potential regulations on credit unions and their members is critical to our proactive advocacy efforts.
We have requested and urged all DakCU members to participate in a CUNA led survey, sharing their interchange related data, that will be kept confidential and shared in aggregate with Congress and leveraged during our Fall Hike the Hill. We definitely understand that this request will likely require some additional work for you to collect this important data from your systems, and we appreciate your willingness to put in some extra time to protect your members and their credit union. Begin the Survey.
We also have an active “Call to Action” regarding the Fed’s proposed changes to Reg II, asking members to reach out to the Fed expressing their concerns over the central bank’s proposal, which aims to place additional limitations on payment card network restrictions. While the Fed Board asserts that these proposed amendments are merely “clarifications,” we strongly disagree. We believe the changes are extremely substantive, and if finalized, will result in significant additional regulatory burdens being placed on credit unions and other financial institutions. This “Call to Action” posted in CUNA’s Grassroots Action Center includes a sample comment letter to provide credit unions with an easy tool to send in their comments.
It is highly recommended to add any details specific to your credit union to supplement the talking points contained in the letter. However, please do not change the Subject Line of the sample as the Federal Reserve Board is very particular about what needs to be included, and we want your comment letter received and reviewed. Finally, be sure to check out Amy Kleinschmit’s Friday Memo article for more in-depth details on this proposal and subsequent “Call to Action.” Please help us by reaching out to the Federal Reserve Board here: Call to Action!
As always, don't hesitate to contact me at jkruse@dakcu.org with any questions or comments.