Co-op Financial Services is providing $30,000 on behalf of its member credit unions to the Electronic Payments Coalition (EPC), to support their efforts to inform legislators of the facts surrounding interchange while opposing changes to the current interchange fee structure.
EPC is a Washington, D.C.-based organization funded by more than 60 credit union, bank and payment systems organizations.
"The EPC is leading the charge against badly conceived legislation on interchange, and we want to do our part in protecting this important income source for credit unions," said Stan Hollen, president and CEO of CO-OP Financial Services. "Along with the Credit Union National Association (CUNA), we stand strongly behind the work of the EPC."
Although President Barack Obama signed H.R. 627, the "Credit Cardholders' Bill of Rights," last month to place tighter restrictions on credit card issuers, the legislation did not include changes to current interchange practices. It did, however, authorize the Government Accountability Office (GAO) to study the issue, which could result in future legislation that threatens interchange.
Indeed, some lawmakers are not waiting for the results of the study. On June 4, Representative John Conyers presented H.R. 2695, the "Credit Card Fair Fee Act of 2009," a bill that would allow merchants to negotiate credit card transaction fees with financial institutions. The proposed legislation excludes credit unions regulated by the National Credit Union Administration (NCUA) and those under $1 billion in assets. The EPC is working to fight this bill and sustain existing fee regulations. On June 9, Senator Richard Durbin introduced S. 1212. This bill would allow the U.S. Attorney General to appoint a panel of Electronic Payments System judges who would act as agents in setting interchange fees.
Interchange revenue is derived from the payment by a retailer's bank to a member's credit union when the retailer chooses to accept that member's credit or debit card for payment. It is a key revenue source for credit unions that helps to partially reimburse them as card issuers for the activities they perform and the risk they take on each transaction.
"We feel Washington does not fully understand the implications of interchange legislation for financial institutions like credit unions that protect the consumer," said Hollen. "Interchange is a simple cost of doing business for a merchant, like paying postage expenses. The retailer pays pennies on the dollar and they receive substantial benefits, including good funds, more sales and greater profits. It is only fair that they pay a fee for the service.
"If the interchange fee is artificially lowered through poor legislation, smaller financial institutions like credit unions would have to make the difficult decision to either raise fees or stop offering credit and debit cards - either option potentially resulting in their members going elsewhere," said Hollen. "Ultimately, of course, the consumer will be harmed in terms of restricted payment choices."