Interchange Fees

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Updated April 2013

During the 112^th Congress Senators Jon Tester (D-MT) and Bob Corker (R-TN) introduced S. 575, The Debit Interchange Fee Study Act of 2011, a bill that would have delayed the implementation of the Durbin debit interchange price caps for two years and require the Federal Reserve, FDIC, OCC and the NCUA to jointly study the true impact of regulating debit interchange and report back to Congress.

The bill’s language was modified under an amendment that would delay the implementation of the Durbin interchange price caps for 12 months with a 6-month study of the proposed rule by the Federal Reserve and functional regulators (including the NCUA). If the Federal Reserve and one other regulator find that certain triggers were met where financial institutions or consumers may be harmed by the current proposal, the Federal Reserve would then have 6 months to rewrite and implement a new rule where all of the costs associated with debittransactions would have to be considered. Furthermore, every two years the Federal Reserve would have to report to Congress on the effectiveness of the exemption to the price caps for those financial institutions with less than $10 billion in assets.

Due to a filibuster threat from Senator Richard Durbin (D-IL), the Tester-Corker amendment required a 60 vote threshold to pass. Unfortunately, the amendment failed to clear the threshold by 54-45 votes. For the official results and to find out how your Senators voted, please click here. While the amendment vote was a significant setback, NAFCU continues to work to mitigate the impact of debit interchange rules on credit unions.

In June of 2011, the Federal Reserve released its final rule which deems the maximum interchange fee that an issuer may receive for an electronic debit transaction, the sum of 21 cents per transaction, plus 1 cent if certain fraud policies are in place and 5 additional basis points to take into account fraud costs. The rule went into effect on October 1, 2011.

After the rule was imposed, as NAFCU predicted, several big banks implemented new fees on the use of debit cards. This decision has led to an overwhelming outcry among consumers who were hit with the fees and forced some banks to roll back those fee increases as their customers took their business elsewhere. In response to this unintended, yet foreseen consequence, Representatives Jason Chaffetz (R-UT) and Bill Owens (D-NY) introduced H.R.3156, the Consumer Debit Card Protection Act, to repeal the Durbin debit card interchange price control amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Electronic Payments Coalition, of which NAFCU is a member, has launched a campaign to show the results of a recent study proving exactly what we predicted: retailers paid much less in interchange fees while passing no savings on to consumers. Data shows that the retail industry has already seen $825 million in savings since the government regulation on debit cards went into effect.

You can learn more at http://wheresmydebitdiscount.com/

NAFCU continues to monitor this issue and is committed to educating the 113^th Congress about the negative impact interchange price caps have had on credit unions of all size.