By Christian Mullins
Three months ago, House Judiciary Committee Chairman John Conyers (D-MI) and Representative Chris Cannon (R-UT) introduced HR 5546, bipartisan legislation titled the Credit Card Fair Fee Act (CCFFA). The bill seeks to ‘ensure competitive market-based rates and terms for merchants’ access to electronic payment systems’. Proponents of the bill include retailers, merchant associations, and small business associations. Opponents count credit card companies, banking associations, and credit union trade associations like Credit Union National Association (CUNA) among their ranks.
All about the money
At issue is the $40+ billion expected to be collected this year in interchange income. Proponents of CCFFA
have seen interchange fee percentage rise as the number of electronic transactions has also increased, resulting in healthy profits for both Visa and MasterCard. In response, they argue that the money is needed for additional infrastructure domestically and worldwide. While that statement is true, reports of MasterCard, Inc’s expected net income increase of 20%-30% over the next three years suggests the interchange fee percentage, currently less than 2% of the purchase price, could trend downward without affecting growth.
The Credit Union Dilemma
When a member makes a purchase with their credit union debit or credit card, their credit union receives a small percentage of the cash transaction. Over the years, many credit unions have come to rely on this revenue to support their ‘plastic’ programs, especially as insurance costs, protecting against fraud and identity theft, has skyrocketed. Every credit union with a plastic program will likely be negatively affected by any rate cuts, assuming Visa and MasterCard ‘pass the charge’. In the end, the burden of rate cuts will affect credit union members in the form of lower savings and higher loan rates.
CUNA has already expressed their displeasure at CCFFA, but this potentially places credit unions on the wrong side of public opinion. For the casual observer, if credit unions line up against ‘Mom and Pop Shops’ or other small businesses, they could upset the delicate distinction between credit unions and banks they’ve worked so hard to cultivate, with the public disregarding ‘people helping people’ as they experience ‘credit unions for credit unions’.
In the end…
This is an election year issue. At a time when every Congressional Representative is facing November elections, attaching themselves to legislation that will resonate with Joe and Jill America is of paramount importance. With legislation titled the Credit Cardholders Bill of Rights in motion, and Federal Reserve rule changes aimed at making fees and statements more transparent, Credit Card Fair Fee Act seems inevitable at this time. During an election year, with the average citizen more in tune with what’s happening in Washington, credit unions find themselves in a rare position: they can either lose interchange fee revenue or the public opinion battle. Neither option is very appealing.
