Credit Unions: Say NO to the Interchange Amendment!

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By Rod Staatz
President and CEO, SECU

In its effort to reform the financial system, Congress has proposed ideas that will lead to more transparency and help consumers. However, one part of the financial regulatory reform bill will harm consumers, rather than help them.

When consumers swipe their debit cards, retailers pay an interchange fee which covers the costs of operating the debit card program and provides key benefits, including reduced fraud and guaranteed payment. Amendment S3217 would arbitrarily limit the cost that merchants pay to accept debit cards, resulting in higher costs to consumers.

If what merchants pay to accept debit cards is lowered, retailers will profit. Card issuers will have to make up the revenue by increasing fees, eliminating free checking, and eliminating rewards programs. Thousands of community banks and credit unions may find they cannot afford to offer debit cards.

Retailers could set unrestricted minimum or maximum amounts to use a debit or credit card. Consumers may not be able to use debit cards to buy a gallon of milk, or they may be forced to use an expensive store card to make larger purchases, like televisions.

Most states offer public benefits on prepaid debit cards. If the rate that these agencies receive to offer those cards is lowered, they will be forced to forego the cost-saving benefits that prepaid debit provides.

While the amendment is written to protect financial institutions with less than $10 billion in assets, the fact is that no issuer is going to incur the cost of developing two networks. Consumers, as well as smaller institutions, will be harmed. Big Banks, and Big Box Retailers, will be the only beneficiaries.

This is not what Congress intended. Please let your legislators know today that the interchange amendment must be removed from the Financial Regulatory Reform bill.

Rod Staatz is President and CEO of SECU, Maryland's largest state-chartered credit union.
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