WASHINGTON – Credit union representatives will join the bankers before Congress this morning in opposition to a new bid that could lead to government regulation of the market for credit card interchange fees.
The nominal foes, members along with Visa and MasterCard of the Electronic Payments Coalition, are fighting efforts by the retailing lobby to open the estimated $50 billion a year market to additional competition. An estimated $5 billion of interchange fees accrue to credit unions.
A bill being debated by the House Financial Services Committee this morning would enable retailers to skirt Visa and MasterCard 'honor all cards' rule by allowing them to refuse lucrative rewards cards that charge high interchange fees. It would also allow retailers to discourage card transactions by assessing a surcharge. And it would give the Federal Trade Commission explicit authority to oversee interchange fees.
The bill is the latest assault on credit union profit centers, joining initiatives to curb overdraft protection fees and a variety of credit card practices.
A representative for NAFCU will be testifying against the bill at today's hearing. Eddie Ambrose, a NAFCU lobbyist, said they believe the provisions of the bill would benefit the retailers and create unintended consequences for consumers.
For one, he said card companies like Visa and MasterCard would be forced to increase interchange rates on preferred cards to make up for lost fees on those cards that are refused or discouraged. He suggested it would allow merchant customers of large banks to refuse cards issued by credit unions. "Allowing merchants to discriminate is problematic," Ambrose told The Credit Union Journal.
The ultimate beneficiaries of this would be retailers and not consumers, he said.
Under the most dire consequences, smaller credit unions and banks could be forced to abandon cards programs if legislation resulted in the reduction of interchange revenue, according to Ambrose.
Credit unions and banks, which control the Visa and MasterCard networks, have teamed up with the payment giants in the past to lobby Congress, most notably to get the 2005 bankruptcy reform passed.
A CUNA representative is also expected to testify against the bill this morning.