May 19, 2009
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News: Credit Unions Fight CC Reform
A new proposed amendment to the Credit Card Reform act currently circulating through the Senate has some credit unions in an uproar. The amendment which is sponsored by Senate Majority Whip Richard Durbin (D-IL.) is an attempt by merchants to reduce the amount of interchange fees they pay on premium credit cards that cost more to process. The card which offers higher rewards for consumers, have higher interchange fees and costs merchants more to process. Trade associations oppose the amendment because they say it would allow merchants to advertise and offer discounts to consumers if they use a different credit card that has a lower interchange fee associated with it. The Credit Union National Associate (CUNA) and National Association for Federal Credit Unions (NAFCU) have partnered together with the trade associations to lower the risks of credit unions who they believe would be hurt if the amendment were passed.
The credit union associations along with the American Bankers Association and the Independent Community Bankers Association maintain that not only will credit card issuing credit unions be hurt by this amendment, but consumers and financial institutions will suffer as well. The trade association had written a letter to lawmakers last week stating the action would “discriminate against payment cards issued by a particular financial institution, including community banks and credit unions." They further stated that the new rules would “adversely impact” the credit card lending business and quite possibly could push some financial institutions out of the market. Opponents of the bill say that the extra reporting and monitoring required by the new bill would create huge burdens for lenders.
The CUNA and NAFCU support a small portion of the CC Reform bill; however, strongly urge lawmakers to reconsider any regulation that would inhibit credit unions from effectively managing risk factors. CUNA President/CEO Dan Mica also stated that consumers would be additionally hurt by the extra time and expense of putting such procedures in place. President Obama isn’t budging from his stand and support of the credit card reform. He expects to see the bill on his desk for signing within the week.