The California and Nevada Credit Union Leagues recently submitted its comment letter to the Federal Reserve Board (FRB) and Federal Reserve Bank of San Francisco regarding the proposed Regulation II debit card interchange and routing fees rule (you can view the Leagues’ executive summary).
The comment period deadline was May 12. The Leagues’ comment letter urges the FRB to withdraw its proposed rule and instead engage in meaningful collaboration with stakeholders across the financial services industry to develop a more fair and balanced solution.
It also touches on how:
“The proposed rule is deeply flawed and misguided, jeopardizing the crucial role credit unions play in providing affordable and accessible financial solutions to their members,” the letter concludes. “By limiting non-interest income, the proposal would hinder credit unions’ ability to compete and offer affordable financial products and services, especially to underserved consumers. And the automatic two-year adjustments proposal fails to take into consideration the economic realities.”
Recent League Efforts
Earlier this year, the Leagues’ FRB/Regulation II Connect For The Cause alert to credit union leaders asked them to urge legislators in Congress to oppose the Fed’s proposed debit interchange rule. Legislators were encouraged to take action by joining a letter to the Fed circulated by fellow congressional lawmakers.
Additionally, in a separate bill, the Fed would have been asked to “stop and study” regarding the impact of Regulation II on low-income and other communities. It would’ve also required the Fed to study the impact of the rule on small financial institutions.
The Leagues released a response toolkit at that time to help credit unions.
Impact of FRB’s Proposal
The FRB’s proposed rule would further impact non-interest income at credit unions after the Durbin Interchange Amendment was implemented through regulatory action in 2011.
While the FRB’s proposal exempts financial institutions with less than $10 billion in assets, the 2011 Durbin Amendment’s “exemption” of smaller financial institutions has proven to be largely illusory, as the regulatory thresholds in the interchange market do not insulate smaller issuers from harm.
America’s Credit Unions (ACU) and the American Association of Credit Union Leagues (AACUL) recently released a study that shows mandated interchange caps negatively impact local and community financial institutions such as credit unions. The Leagues and ACU know the proposed rule is seriously flawed and will cause significant harm to credit unions and their members, which is why solid data is important to create a full picture of credit unions’ experience.
Since the proposal was developed based on data collected from financial institutions with $10 billion or more in assets, it would have major ramifications on the industry and hurt credit union members.
The Leagues would like to thank credit unions that were involved in the May 12 comment letter process! The Leagues will keep you updated going forward.
