Debit interchange proposal fails to account for potential impact

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Credit unions strongly oppose the Federal Reserve’s debit interchange proposal, America’s Credit Unions President/CEO Jim Nussle wrote to the House Financial Services Committee before Fed Chair Jerome Powell’s testimony this week. Nussle noted  that current debit interchange caps have caused significant real-world economic harm to credit unions and their members, and the recent proposed expansion would only compound that harm.

“Any Board action should be based on robust, thorough, and accurate data that reflects market realities for all covered issuers,” Nussle said . “The Board’s proposal is based on data from 2021 that does not account for the far-reaching changes to Reg II requiring dual routing for card-not-present transactions that went into effect on July 1, 2023. This change has direct bearing on the data used to calculate the proposed interchange fee cap including the aforementioned ACS costs that are central to the justification for drastically reducing the cap.”

Nussle added the impact of the new routing requirements is undetermined and must be quantified before proceeding with any additional rulemaking.

In addition, America’s Credit Unions is opposed to the creation of a central bank digital currency (CBDC), which would represent a fundamental transformation of banking and payments and poses serious risks to consumers and the financial system.

“The creation of a CBDC deserves serious and exacting consideration that includes a focused enunciation of the issues Congress and the Federal Reserve would intend to solve through a CBDC that are singular and unique to the digital currency, novel and not duplicative of current innovations in the marketplace, and that do not worsen the provision of financial services for consumers or credit unions,” Nussle wrote.

Consideration of a CBDC must proceed with several cornerstone principles, including:

  • Implementation of a CBDC should not proceed without congressional authorization and a clear structure and novel purpose;
  • Any CBDC must utilize an intermediated model that preserves the direct relationship between consumers and financial institutions; and
  • Deposit substitution and its cascading effects must be sufficiently mitigated.

America’s Credit Unions will continue to share with policymakers its concerns about interchange restrictions and the negative impact this proposal and others could have on the credit union industry.

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