June 19, 2014
Thursday Edition
NerdWallet: Merchants do not pass on interchange savings to consumers

The article outlines the findings of a paper published by Todd Zywicki, a published, nationally recognized expert on consumer credit. He, along with colleagues at the International Center for Law and Economics, just studied the effects of the interchange rule.

Prior to the new law, interchange fees would be assessed by issuers, such as Visa and MasterCard, to merchants when a credit or debit card transaction was executed. Debit card usage was usually free of charge to the consumer. On average, the financial institutions would end up getting two percent of the transaction as interchange fees. 

The interchange rule was intended to cap the fees, and was supposed to limit them to charges that were "reasonable and proportional to the actual cost" of the service. It reduced the fees financial institutions were collecting, allowing merchants to save money, which, they argued during the legislative battle that won the cap--they would pass along to consumers. Not so, says NerdWallet.

Under the interchange rule, merchant fees are capped at 1.12 percent. "Yet they keep that 0.88 percent difference rather than pass on savings to consumers," NerdWallet explained in the article. "What genius politician thought that merchants would pass on those savings? There is no incentive for them to do so. Merchants are businesses. If a business finds a way to save on costs, they will save on costs, which increases their net profit." 

Credit unions and community banks are being harmed by the regulation, according to CUNA. The letter noted a U.S. Government Accountability Office study which found smaller community banks and credit unions, which were supposed to be "exempted" from the fallout of this legislation, have instead seen interchange revenue decreases of five percent in the first three months following interchange fee cap implementation.

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Retailers appeal credit card interchange fee lawsuit settlement

The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) requested that an appeals court overturn a judge's approval of a lawsuit settlement involving credit card interchange fees from Visa and MasterCard. The two retailer organizations claim the settlement was negotiated by a select group of merchants.
U.S. District Court Judge John Gleeson ruled in December 2013 ruled in favor of the settlement, and the appeal has been filed with the 2nd U.S. Circuit Court of Appeals in New York.
"A broad cross section of the American retail industry numbering thousands of businesses from iconic national department store chains and general merchandise chains to apparel outlets, specialty shops, restaurants and one-location Main Street stores thoughtfully analyzed the settlement and concluded that it offers them no benefit," reads a brief filed by the NRF and RILA Wednesday. "While a settlement this skewed was bound to be unpopular, the extent of dissatisfaction within the retail industry has been extraordinary."
The brief cites a number of what merchants claim are legal errors in the decision, including failure to adequately balance the monetary relief against the requirement to give up future legal claims, dismissing "substantive and thoughtful" opposition and ignoring a court-appointed expert's opinion that the proposal for surcharging was of "uncertain" value that would "have only a small impact" on interchange fees.
Opponents of the settlement claimed it "fails to reform the price-fixing system under which Visa and MasterCard set fees for credit cards," cards issues by thousands of financial institutions around the country.

Click here to read the complete article from CUNA News Now.

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CUNA meets with Metsger on RBC proposal

CUNA is meeting with NCUA Chairman Debbie Matz, board member Rick Metsger and Director of Examination and Insurance Larry Fazio this week. The meeting with Metsger and his senior policy advisor, Mike Radway was productive. CUNA came away with the impression that Metsger is considering all of the comments filed and is open to significant changes to the proposed rule. Metsger told CUNA that he is meeting with state leagues and credit union groups, as well.

Areas CUNA discussed with Metsger were:

  • Lowering the RBC component for well-capitalized credit unions so that it is no higher than the RBC component for adequately capitalized CUs
  • Allowing the one-percent NCUSIF deposit to be included in the calculation of RBC
  • Eliminating the provision that would authorize NCUA to impose additional minimum capital beyond what the rule requires
  • Revising the risk-weightings, particularly in the areas of member business loans, mortgages, mortgage servicing and CUSO investments
  • Providing a more complete definition of "complex" credit unions so that fewer credit unions will be covered by the rule
  • Providing ample time for credit unions to comply with a RBC final rule 


CUNA is still working on meeting with Chairman Matz and Fazio this week. You can read more at CUNA News Now. 

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NCUA Report available

The June NCUA report has been posted. This monthly publication from the NCUA has many useful pieces of information. The June report includes how to use HMDA data for your mortgage loans, a view from a director in Pennsylvania, and preparing members for severe weather season. 

This publication is great for all staff and also your directors. You can download the latest report from the NCUA's website. 

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In This Issue
Thursday Edition
NerdWallet: Merchants do not pass on interchange savings to consumers
Retailers appeal credit card interchange fee lawsuit settlement
CUNA meets with Metsger on RBC proposal
NCUA Report available
LSCU & Affiliates Media

Contract Management
LEVERAGE has a contract management solution that is web based and easy for your credit union to stay on top of all of the credit union's various contracts.

Southeastern Credit Union Foundation
The Southeastern Credit Union Foundation works hard for Alabama and Florida credit unions. The foundation offers five pillars: financial education, professional development, disaster relief, fundraising, and the credit union philosophy. This video gives a better explanation to what the foundation offers credit unions.

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