Durbin Amendment Hits Credit Unions with $1.38 Million Loss in Q3
Credit unions saw their debit interchange revenue drop by $1.38 million in Q3 of 2012, according to the Credit Union National Association. The alleged culprit is the Durbin Amendment, which imposed a cap two years ago on debit interchange fees, or swipe fees: charges on merchants that are levied by card processors very time a card is used at the point-of-sales terminal.
Durbin intended both to give retailers a break from those fees and to protect smaller financial institutions like credit unions from its impositions – financial institutions with assets under $10 billion were exempt from the camp. However, as this report suggests, such is not the case.
As we reported last year, smaller institutions, too, are vulnerable to Durbin because of concurrent increases in merchant power: they have more discretion as to consumers’ method of payment, and many will steer customers away from debit cards offered by smaller institutions. The reason: credit unions and small banks often levy higher interchange fees on merchants than the big guns.
Beyond those credit unions, too, the study’s findings are troublesome. For their customers as well, this is bad news: those smaller financial institutions are the ones that often provide free services to low-income clientele. And those free services are made possible by debit interchange; it’s one of credit unions’ biggest revenue drivers.
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