Federal regulators provide temporary relief for credit unions approaching $10 billion
On November 20, 2020, the Federal Reserve along with the FDIC and OCC published an interim final rule to mitigate the costs to banks of crossing asset-based regulatory thresholds sooner than expected. Just in time for Thanksgiving, the rule permits banks under $10 billion in total assets as of December 31, 2019 (community banking organizations) to use asset data as of December 31, 2019, in order to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021. One of the significant thresholds covered under the rule is the trigger for debit interchange caps, which were instituted by the Durbin Amendment as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Durbin Amendment modified the Electronic Fund Transfer Act (EFTA) to restrict the routing and pricing of electronic debit transactions by card issuers, and the Federal Reserve has implemented these statutory provisions in Regulation II (12 CFR Part 235).
From an advocacy standpoint, NAFCU opposes interchange price caps, which have had the effect of depressing credit union fee income while transferring wealth to retailers. One recent study of interchange doubts whether this transfer corresponded with any meaningful benefit to consumers, but does note evidence of higher retailer margins.
For most credit unions, the transition to interchange compliance can be managed adequately with planning. But some have grown faster than expected in 2020 and are eager to take advantage of any mechanism to avoid an unexpected hit to their bottom lines. The interim final rule explains that a community banking organization that was below an asset threshold covered by the rule (e.g., the $10 billion threshold applicable to small issuers under § 235.5) as of December 31, 2019, generally will be deemed to remain below that threshold through the end of 2021. The second to last column in the chart below illustrates how this framework effectively delays recognition of asset growth and postpones compliance. The last column illustrates that the relief is temporary and the default asset measurement approach will resume after 2021.
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