Don’t let them fool you: Interchange legislation hurts CUs and their members

Last month, Senators Dick Durbin, D-Ill., and Roger Marshall, R-Kansas, introduced legislation to expand the “Durbin Amendment,” which was enacted in 2010 as part of the Dodd-Frank Act. This NAFCU-opposed legislation, the Credit Card Competition Act, aims to expand interchange price controls by creating a new credit card routing mandate, which would be a direct detriment to credit unions and their members.

The name of the legislation sounds nice on paper; however, it is essentially a big-box bailout, imposing a back-door price control on credit card interchange fees that helps line the pockets of giant retailers at the expense of American families and Main Street. By removing consumers’ autonomy when choosing networks on credit cards, the legislation also allows retailers to pick whichever network to process transactions and select the cheapest – and potentially less secure – option.

While the bill seeks to limit these new requirements to only financial institutions over $100 billion in assets, the history of the failed exemption in the Durbin Amendment has shown that these price controls will negatively impact all institutions.

With no modicum of consideration to the overwhelming risk from untested networks, loss of safe and affordable banking products, and higher cost of credit it would pass on to consumers and financial institutions, it’s plain to see this bill is bad policy all around and an imminent threat to credit unions and their 131 million members.

Labor Credit Union President and CEO Thomas Domingue explained the implications well, stating, “This legislation will have a significant detrimental impact on our ability to continue providing services to underserved areas and groups within our membership. A reduction in our interchange income, that this legislation will result in, has a compounding impact. For every $0.10 reduction in interchange income this results in $1 being removed from our ability to lend to those in need, or to provide critical services such as checking accounts for free.”

Defense Credit Union Council President and CEO Tony Hernandez echoed a similar sentiment, “Just like the previous Durbin Amendment in 2010, this legislation will do nothing to lower prices for working Americans. It will once again drive up the cost of basic banking services for consumers – hitting lower-income Americans and military families the hardest!”

Next month, from September 11th through the 14th, credit unions will have a unique opportunity to come to Washington, D.C., and meet with their members of Congress in-person to explain just how detrimental this legislation will be. If you haven’t already registered for NAFCU’s 2022 Congressional Caucus, I urge you to do so now. You’ll not only be able to meet with your representatives, but also hear from a lineup of credit union champions and federal regulators on critical issues facing the industry today.

Your voice in Washington is critical, and here at NAFCU, our award-winning advocacy team works hard to elevate your concerns to the highest levels and fight for solutions that benefit you. But big box retailers are planning to fly to Capitol Hill to spread their lies about the Durbin/Marshall legislation the very same week. There has never been a more critical time than now to proactively fend off their attacks. The credit union message must be unified and clear in Washington and we hope you join us in this fight.