DCUC, NAFCU to Congress: Keep Defense Bill ‘Clean’
Credit union groups wrote a letter asking Congress to keep credit card interchange and third-party vendor legislation out of the defense bill. Learn why.
Credit union groups pen letter aimed at keeping credit card interchange and third-party vendor legislation out of defense bill.
Credit union trade groups are pushing House and Senate leaders to pass a “clean” defense reauthorization bill that does not include two provisions they find particularly odious.
In a letter to congressional leaders, NAFCU and the Defense Credit Union Council (DCUC) asked the leaders to ensure that any defense bill does not contain a provision dealing with credit card interchange fees. They also asked that lawmakers make sure the bill does not include a provision giving the NCUA oversight powers over third-party vendors.
The House has passed its version of the annual defense bill, which contains the third-party vendor provision. The Senate has not yet considered its annual defense bill, however Sens. Richard Durbin, D-Ill., and Roger Marshall, R-Kan., have proposed an amendment adding the interchange language.
Since the defense authorization is considered must-pass legislation, members of Congress are trying to add their pet proposals to the bill.
Credit Card Interchange Legislation
The interchange legislation would require the Federal Reserve to issue rules that would ensure banks that currently use the four-party card processing system be required to use at least one affiliated network in addition to Visa and Mastercard.
In their letter, NAFCU President/CEO B. Dan Berger and DCUC President/CEO Anthony Hernandez wrote that the proposal “would function as a backdoor price control on credit card transactions and would affect financial institutions of all sizes, regardless of the proposed exemption, and could greatly increase fraud costs as merchants select cheaper but less secure networks to process transactions.”
The two contend that the section of Dodd-Frank dealing with debit card interchange—commonly known as the Durbin Amendment—affects all financial institutions, including those below an exemption threshold.
“Those smaller institutions have seen a precipitous erosion of their per-transaction debit interchange revenue as a result of the Durbin Amendment and taking similar steps on credit card interchange would put them at risk,” the letter states.
They added, “Credit unions are committed to serving their members and, as such, must be able to make a reasonable return on payment card programs in order to continue to provide important consumer financial services.”
Third-Party Vendor Authority Legislation
Last week, NCUA board members urged Congress to give the agency authority over third-party vendors.
But Hernandez and Berger contend that the agency already can gain access to information about vendors, writing, “We believe the agency’s time and resources are better focused on reducing regulatory burden by coordinating efforts among the financial regulators.”
They also told lawmakers that the NCUA sits on the Federal Financial Institutions Examination Council (FFIEC) and that the agency should be able to request the results of a core processor examination from one of the other regulatory agencies that are members of the council.
There have been reports that some FFIEC agencies have been reluctant to share reports with the NCUA since it lacks vendor authority.
If that is the case, Berger and Hernandez suggest that Congress could step in and compel council members to share the information.