Proposed government price caps on interchange will leave consumers more vulnerable and create less access to services, America’s Credit Unions Chief Advocacy Officer Carrie Hunt told a Punchbowl summit on the digital payments economy Tuesday. Hunt outlined how credit unions are fighting to expand digital services despite barriers put into place during her panel at the event, which also featured an interview with House Financial Services Chair Rep. Patrick McHenry, R-N.C., among others.
“We have an ecosystem where interchange exists to cover the costs of a transaction, and to make sure things are running efficiently and effectively,” Hunt said. “When the government steps in to try and cap or artificially control those costs, then the market doesn’t work the way it should.”
She referred to both the Big Box Bailout bill and the Federal Reserve’s debit interchange proposal as two very real threats that impact interchange income and harm the entire payments system.
Hunt noted that history shows that financial institutions and consumers are affected when interchange income goes down, and cited estimates that debit interchange income would go down by one-third if the Fed’s proposal is finalized.
“From the regulated financial institution perspective, where’s the money going to come from if they have to cover costs that aren’t covered by interchange anymore?” Hunt asked. “Unfortunately, it’s going to have to come out of other areas and make things for expensive for the consumers. For credit unions in particular, as not-for-profits, that’s the last thing that we want.”
Hunt encouraged members of Congress to listen to the data their credit union constituents are bringing them, which show that both debit and interchange caps benefit the biggest merchants at the expense of consumers, small businesses, and community financial institutions.
She also noted that these threats come as credit unions continue to evolve services—particularly in the digital space—to meet member needs.
