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Co-Op supports EPC effort to defend credit unions' right to interchange revenue
June 17, 2009
RANCHO CUCAMONGA, Calif. — Co-Op Financial Services is providing $30,000 to the Electronic Payments Coalition to support EPC's efforts to inform legislators about the facts surrounding interchange, while opposing changes to the current interchange fee structure.
EPC is a Washington, D.C.-based organization funded by more than 60 credit union, bank and payment-systems organizations.
"The EPC is leading the charge against badly conceived legislation on interchange, and we want to do our part in protecting this important income source for credit unions," said Stan Hollen, president and chief executive of Co-Op Financial Services, in a news release. "Along with the Credit Union National Association, we stand strongly behind the work of the EPC."
Although President Barack Obama signed H.R. 627, the "Credit Cardholders' Bill of Rights," last month to place tighter restrictions on credit card issuers, the legislation did not include changes to current interchange practices. It did, however, authorize the Government Accountability Office to study the issue, which could result in future legislation that threatens interchange.
On June 4, Rep. John Conyers Jr. (D-Mich.) presented H.R. 2695, the "Credit Card Fair Fee Act of 2009," a bill that would allow merchants to negotiate credit card transaction fees with financial institutions. The proposed legislation excludes credit unions regulated by the National Credit Union Administration and those with less than $1 billion in assets.
According to Co-Op, the EPC is working to fight that bill and sustain existing fee regulations. On June 9, Sen. Richard Durbin (D-Ill.) introduced S. 1212, which would allow the U.S. Attorney General to appoint a panel of Electronic Payments System judges who would act as agents in setting interchange fees.
Interchange revenue is derived from the payment by a retailer's bank to a member's credit union when the retailer accepts that member's credit or debit card. It is a key revenue source for credit unions, Co-Op says.
"We feel Washington does not fully understand the implications of interchange legislation for financial institutions like credit unions that protect the consumer," Hollen said. "Interchange is a simple cost of doing business for a merchant, like paying postage expenses. The retailer pays pennies on the dollar and they receive substantial benefits, including good funds, more sales and greater profits. It is only fair that they pay a fee for the service."
If the interchange fee were lowered, Hollen says, smaller FIs would have to raise fees or stop offering credit and debit cards.
"Ultimately, of course, the consumer will be harmed in terms of restricted payment choices," he said.
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