Leadership at the National Association of Federally-Insured Credit Unions (NAFCU) has voiced concerns over the Federal Reserve’s proposal to make changes to Regulation II – which covers debit card interchange fees and network routing exclusivity.
The proposal seeks to clarify that debit card issuers should enable, and allow merchants to choose from, at least two unaffiliated networks for card-not-present transactions, such as online purchases.
“The Federal Reserve’s decision to reopen Regulation II for comment, even for the purpose of ‘clarification,’ does little to aid American consumers who have yet to see the interchange promises of merchants realized in the form of lower prices,” NAFCU President and CEO Dan Berger said. “Interchange caps introduced by the Durbin Amendment have only rewarded merchants who now want to distort the competitive landscape further by restricting credit union members’ freedom to use the safe, affordable, and innovative payment options they want.”
The Durbin Amendment directed the Fed to regulate debit interchange fees to stop card-issuers from unfairly charging merchants and, in turn, protecting consumers from higher costs. The Fed’s proposal for Regulation II – the Durbin Amendment’s implementing regulation created under a Dodd-Frank Act provision – is in light of information indicating that often only one network is enabled for card-not-present debit card transactions.
NAFCU contends that the Durbin Amendment should be abandoned as it was supposed to benefit consumers with lower prices. However, NAFCU points out that no evidence suggests that merchants have passed along their savings to consumers. It has also resulted in the loss of revenue for banks and credit unions that has led to industry consolidation and having to charge for services that were once free, such as checking accounts.
In addition, NAFCU is opposed to any efforts that would lower debit card interchange fees or extend price caps or routing and other restrictions to credit cards. The organization will continue to advocate against efforts that would undermine credit unions’ interchange income and limit their ability to offer their members affordable products and services.