Bernanke delays debit interchange standards deadline

Due to the large response for public comment on debit interchange provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act  Federal Reserve proposes debit card interchange fee standards, Bernanke announces a delay in issuing standards, due April 21. He also states they are committed to completing rulemaking for the July 21 mandated implementation date.

March 29, 2011 Bernanke letter to Senate Banking Committee (pdf).

The Credit Union National Association responded with their own press release:

Credit unions urge Bernanke to support delay in debit interchange law

March 30, 2011

FOR IMMEDIATE RELEASE
Contact: Patrick Keefe
CUNA Communications, 202-508-6765

Credit unions have urged Fed Chairman Ben Bernanke to support a congressionally mandated delay in the implementation of the debit interchange law, due to take effect July 21, to allow for “much-needed time” to consider many concerns raised about the new law, and to give the Fed time to “develop rules that will ensure the outcome Congress intended for consumers and issuers, as well as for merchants.”

In a letter, CUNA President and CEO Bill Cheney notedl the Federal Reserve Board chairman’s “candid assessment” by the Fed that the agency would not meet the statutory April 21 deadline for the issuance of debit interchange fee standards.

However, Cheney also pointed out that, as a result, the final rule will now be issued much closer to the implementation date of July 21 – and that’s problematic for credit unions and others. “We are very concerned there will be insufficient time for institutions, networks, and the marketplace to prepare for compliance with the final rule,” Cheney said.

The complete text of CUNA’s letter to the Fed’s Bernanke follows:

- – - – - – - – - – - – - – - -

March 30, 2011

The Honorable Ben S. Bernanke
Chairman
Board of Governors of the Federal Reserve System
20th and C Streets, NW
Washington, DC

Dear Chairman Bernanke:

On behalf of the Credit Union National Association, I wanted to communicate with you following your recent statements and letters to Congress yesterday regarding the regulation of debit card interchange fees.   CUNA represents about 90% of the nation’s 7,600 state and federal credit unions which serve approximately 93 million members.

We applaud your willingness to try to help small issuers, as you indicated last week at a meeting of the Independent Community Bankers Association.  Also, we appreciate your candid assessment to Congress that it is not possible to meet the statutory April 21 deadline for the issuance of debit interchange fee standards.

However, because the Board’s final rule will now be promulgated closer to the July 21 effective date for the interchange standards and the issuance date for the routing and exclusivity provisions, we are very concerned there will be insufficient time for institutions, networks, and the marketplace to prepare for compliance with the final rule.

In light of all the concerns about the regulation of debit interchange fees, we firmly believe that a congressionally-mandated delay is not only reasonable but also necessary in order to ensure small issuers will not be harmed and consumers that rely on them will not be disadvantaged.

We urge the Board to work with Congress to support legislation that would delay implementation, allowing much needed time to consider these issues and develop rules that will ensure the outcome Congress intended for consumers and issuers, as well as for merchants.

Thank you for your attention to this very serious matter.

Best regards,
Bill Cheney
President and CEO
Credit Union Natl. Assn. (CUNA)
Washington, DC

cc: Secretary of the Treasury Timothy Geithner
Senate Banking Committee Chairman Tim Johnson
Senate Banking Committee Ranking Member Richard Shelby
House Financial Services Chairman Spencer Bachus
House Financial Services Committee Ranking Member Barney Frank
Special Advisor to the President Elizabeth Warren

 

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Comments:

“Credit unions have urged Fed Chairman Ben Bernanke to support a congressionally mandated delay in the implementation of the debit interchange law”. There is a HUGE lobbying effort to  delay the law from being implemented, and 17 senators have signed a bill to  delay the new rule by two years and require a one-year study. Since there were years of study prior to the law being signed by President Obama, and the committee has had many months to prepare the standards, you have to wonder how our leaders could have gotten it so grievously wrong that nothing can be done for years.

The biggest problem most banks have is the governement setting a maximum fee they believe is too low.  I think that is a critical area that needs to be focused on. In Florida, FPL, our local utility is allowed to make 9-11% profit. The banks are not being given the same consideration.

At a minimum, implementation may need to be delayed to enable the marketplace adequate time to meet compliance. My thoughts? The lobbyists have so much traction, there will be no debit fee relief for merchants in 2010. This will result in even higher profits for banks in 2011. Why? Because the debit network fees have been gradually increased in anticipation of future cuts.

Merchants who want to reduce costs by increasing debit, which is still cheaper than credit, can do so with CenPOS. CenPOS technology gives merchants the ability to offer discount incentives on customer purchases for using debit cards. Discounts are  automatically calculated and put on the customer receipt.

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