NASCUS Supports Additional Study of Debit Interchange Cap Proposal

April 4, 2011 —In a letter to Federal Reserve (Fed) Chairman Ben Bernanke, NASCUS expressed its support for additional study of the impact of the debit interchange fee cap proposal on credit unions.

As required by Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fed issued a proposed rule amending the Electronic Transfer Act to add a new section establishing “reasonable and proportional” debit interchange fees. There is an exemption for issuers under $10 billion in assets.

In its letter, NASCUS questions whether the exemption for issuers under $10 billion in assets would insulate them from unintended consequences. State credit union regulators are supportive of additional time to study the impact of this proposal on issuers under $10 billion in assets, given a majority of state-chartered credit unions fall into that category. “These unintended consequences may include a significant loss in income for institutions whose balance sheets are already challenged by economic conditions and any eventual rise in interest rates,” wrote NASCUS. “State credit union regulators also believe additional study is needed to verify that the proposed cap on debit interchange fees is reasonable and proportional to the cost of the transaction, including fraud.”

The Dodd-Frank Act requires the Fed to implement the regulation by July 21. However, recently, Chairman Bernanke announced the Fed would not meet the April 21, 2011 deadline for promulgation of the final regulation. Legislation has been introduced in the House (H. R. 1081) and the Senate (S. 575) to delay the implementation of the regulations to provide additional time for study. However, as of April 4, there have been no votes on the legislation in either chamber.

To view NASCUS’ letter, click here.