Editor’s Note: The Senate vote discussed in the story below further highlights the need for the Federal Reserve to determine the full data security costs associated with debit card transactions, as required by law, and to adjust allowable interchange fees accordingly. CRE’s letter to the Board discussing cybersecurity costs may be found here.
From: Credit Union Times
Senate Defeats Debit Interchange Delay Measure
Credit unions’ efforts to delay the Federal Reserve’s rule regulating debit interchange fees by up to a year came up short today as the Senate defeated an amendment by Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.).
The measure received 54 votes, six short of the 60 needed. There were 45 senators who opposed it.
The vote capped a year-long battle between financial institutions and retailers over the fees that retailers pay every time someone swipes their debit card. The financial overhaul bill passed last year contained an amendment sponsored by Senate Majority Whip Dick Durbin (D-Ill.), which mandated that the Fed write a rule on interchange fees. Durbin’s amendment passed last year 64-36.
The Corker-Tester amendment would have mandated financial regulators, including the Fed and the NCUA, to perform a six-month study to consider: The fixed and incremental costs to the financial institutions of the new rules; whether the rules would adversely affect consumers, and whether the small issuer exemption was feasible. If any regulator found problems in one of those areas the Fed would have had to rewrite the rule within six months.
Credit unions joined with frequent adversaries to lobby for the amendment.
CUNA, NAFCU and the Independent Community Bankers of America wrote lawmakers just before the vote and said that if the amendment fails “the millions of consumers served by the nation’s community banks and credit unions would be directly harmed, and would end up paying more for their banking services. And who would benefit? The top 1.5% of the largest, big-box retailers in the nation.’’
Those groups did extensive grass roots and in-person lobbying on the issue, as did the retailers. Both sides also ran television advertising campaigns.
Tester said during today’s debate that the Fed rule didn’t contain enough provisions for small issuers such as community banks and credit unions and could make them less profitable or increase the likelihood that they will fail.
Durbin said the Tester-Corker amendment would mostly benefit big banks.
“The biggest banks make the biggest money in this process. Far and away,’’ he said.
The Fed issued a draft rule in December and was supposed to issue a final rule next month but has been delayed in doing so because it is still going through the large number of comments it received on the proposal. The final rule is supposed to take effect on July 21.
Acording to the proposed rule, the allowable costs for interchange would be limited to no more than the issuer’s allowable costs divided by the number of electronic debit transactions on which the issuer received or charged an interchange transaction fee in the calendar year. Or the issuer could receive debit interchange capped at 12 cents per transaction.