Credit Union National Association on Tuesday said it has terminated talks aimed at minimizing the onerous interchange provisions in the bank reform bill and has changed focus to knocking the provision out of the bill when Senate and House leaders meet to reconcile different versions of the legislation.

“We’re not negotiating on language any more,” said CUNA’s chief lobbyist John Magill. “We have a completely different tactic and that is trying to have the language removed in conference.”

CUNA had been negotiating with the staff of Illinois Sen. Richard Durbin, the sponsor of the interchange provision, on ways to minimize the impact on credit unions. CUNA is concerned that a requirement of the provision to have the Federal Reserve direct that interchange fees be lowered if they are found to be too high will affect credit unions, even if credit unions and banks with less than $10 billion in assets are exempted. That is, because if the Fed directs that fees on big bank transactions be lowered it will make the big banks’ cards more attractive to consumers. CUNA had hoped to insert language into the bill that would have allowed MasterCard and Visa to operate a two-tiered system for interchange, but it is not clear how that would work and talks aimed at creating such a system have ended, according to Magill.

The interchange provision passed the Senate with a strong bipartisan majority, 64 votes, creating a difficult prospect for knocking it out of the final bill.

As a result, all hope appears to lie with House Financial Services Committee Chairman Barney Frank, the Massachusetts Democrat who will head the conference on the bill. Frank ushered the bill through his committee and the full House without the interchange provision. “In the House they haven’t even considered this proposal,” Magill told Credit Union Journal yesterday. “The House needs to understand why we’re opposed and why a $10 billion carve-out won’t help us.”

“Frank is the key,” said the CUNA lobbyist.

However, trouble emerged yesterday when a bipartisan group of House members called on House Speaker Nancy Pelosi to ensure that the interchange provision is retained during the conference. The group, which includes Reps. Peter Welch (D-Vt.), Bill Shuster (R-Penn.), Chris Carney (D-Penn), Walter Jones (R-N.C.), Keith Ellison (D-Minn.) and John Hall (D-N.Y.), emphasized their support for the interchange provision and urged House leaders, including Frank, to ensure it survives the conference.

NAFCU yesterday said it is not yet ready to negotiate a compromise and will continue to lobby for elimination of the interchange language from the bill.

"NAFCU is opposed to the interchange provision. Period,” said Dan Berger, chief lobbyist for the group. “There is nothing to compromise on yet, especially since the conferees have not all been appointed. We have been consistently opposed to the interchange amendment as it does nothing but make the big box stores and giant retailers richer at the expense of consumers and small financial institutions. We historically negotiate from a position of strength as opposed to compromising before the conference even begins."

CUNA and NAFCU have powerful allies and opponents on the interchange bid. The credit union lobby groups are teamed up with the American Bankers Association, Independent Community Bankers of America, MasterCard, Visa and all of the big banks in the Electronic Payments Coalition.

Lobbying for the interchange provision is a group calling itself the Merchants Payment Coalition, which is comprised of some of the most powerful Washington lobbies, including the National Association of Convenience Stores, National Grocers Association, National Retail Federation, National Association of Chain Drug Stores, National Restaurant Association and the Petroleum Marketers Association of America.

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