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For Immediate Release Contact: Patrick Harris Director of Media Relations Ohio Credit Union League pharris@ohiocul.org 800-486-2917

Ohio Credit Unions Mobilize to Defeat Interchange Legislation

Financial Reg. Reform Package ‘detrimental’ to credit union members;
debit card fees likely for consumers

Columbus, Ohio (June 2, 2010) – An unintended provision in the U.S. Senate-approved Financial Reform Package has Ohio credit unions joining a national movement to help Congress understand how the harmful language will negatively impact credit unions, their members, and consumers across the country.  Credit unions are sending a clear message to Congress: Get rid of the Senate interchange amendment, which will increase consumers’ costs to use a debit card.

“This amendment, which passed the Senate without debate, hearing, or markup, will have significant consequences for credit unions and community banks and their ability to offer basic debit cards at affordable rates for average consumers,” said Doug Fecher, CEO of Wright Patt Credit Union in Dayton.  

Credit unions depend on interchange income to offset the costs of offering a debit card system to their members, a necessity to stay competitive in the financial services market.  The Credit Union National Association (CUNA) has said the legislation, in its current form, could cost a credit union as much $15 to $30 per debit card issued.  The new law could mean passing those costs on to the 2.65 million credit union members in Ohio, while other credit unions may be forced to end their debit card programs altogether.

“Debit cards are an important financial tool for our members and are the method of choice for almost all transactions,” said Barry Shaner, CEO of Directions Credit Union, which serves members in Northwest and North Central Ohio.  “Since we run this service at near break-even, the increased costs that will result from this legislation will almost certainly be borne by consumers in the form of fees for services that they now receive free of charge.”

There is confusion surrounding the Senate interchange amendment, which includes language that is meant to exempt financial institutions with less than $10 billion in assets.  However, according to a letter to the U.S. House of Representatives signed by CUNA and the Independent Community Bankers of America, the amendment would require the Federal Reserve, not market forces and competition, to set interchange rates for debit card purchases.  These rates would not address 90% of the remaining costs that card-issuing institutions must cover – including card issuance, fraud, and call centers – because the Fed is limited legally to consider only a fraction of the expense involved in running a debit card program.

If passed, debit cards issued by credit unions not complying with the rate enacted by the Fed could be turned down by retailers at the point of purchase, giving merchants the authority to discriminate against certain cards.

“This amendment is detrimental to smaller financial institutions, especially credit unions,” said Paul Mercer, President of the Ohio Credit Union League.  “The ability of local, community-based credit unions to compete with big banks hangs in the balance.  We are mobilizing our movement to ensure Congress gets the message.”

Supporters of the amendment claim it will be a boon to businesses; however, there is no evidence suggesting merchants would pass along to consumers any savings resulting from interchange fee savings.  A May 25 USA Today article, “Changes in Bank, Debit Card Fees May Have Limited Impact,” highlights the real effect the amendment will have on consumers.  A retail strategist quoted in the article states that interchange fees are not directly related to what products cost and that the greatest impact on consumers is likely to be in service or technology – not prices.

Fecher agrees, stating “I don't believe for a second that the ‘savings’ windfall the amendment produces for the nation's largest retailers will ever be passed along to the public.”

Added Bill Burke, CEO of Day Air Credit Union in Dayton, “This amendment would allow retailers to shift their cost of doing business on to card issuing banks and credit unions.  If enacted, the loss in revenue could likely force various pricing changes which will negatively impact members.”

Already more than 7,000 contacts have been made to Congress on this issue by Ohio credit union members, volunteers, and staff (82,000 nationally).  Meetings are scheduled with the Ohio congressional delegation in district offices this week, followed by meetings on Capitol Hill, June 9 and 10.  At least 25 Ohioans are scheduled to visit Congress.  The Financial Reform legislation, including the interchange amendment, is pending debate in conference committee.

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The Ohio Credit Union League, with offices in Columbus, is a state trade association representing 393 credit unions. Credit unions are not-for-profit financial institutions owned and democratically-controlled by their members. Ohio credit unions provide savings, loans, and other consumer financial services to their 2.65 million members. To learn more, visit www.OhioCreditUnions.org.