Thousands of CU Leaders Push Back on Interchange Legislation: CU Trades Report

After Sens. Roger Marshall (R-Kan.) and Dick Durbin (D-Ill.) reintroduced legislation Wednesday to extend the debit routing provisions of the 2010 Durbin Amendment to credit cards, the credit union industry leapt into action, pushing back against it in full force.

The legislation, according to credit union and banking groups, would create new credit card routing mandates “that would eliminate funding for popular credit cards rewards programs, weaken cybersecurity protections and reduce access to credit for those who need it most.”

Both NAFCU and CUNA activated their Grassroots Action Center late last week in response to the proposed legislation. According to CUNA, more than 4,000 messages from pro-credit union individuals were sent to lawmakers to voice their opposition to the legislation. NAFCU officials said activity from its Grassroots Action Center has “been one of our highest activation rates ever in the first 72 hours of the campaign” and that they were still in the process of tallying up the actual numbers as of this publication.

The Grassroots Action Center includes pre-written messages that people may send to lawmakers who represent their communities. In part, one pre-written message said, “I urge you to oppose changes to the current interchange system and oppose the S. 1838 Credit Card Competition Act of 2023 – a Big Box Bill that will hurt consumers like me.”

Included with the messages from individuals to lawmakers was a letter sent by 10 credit union and banking groups on Friday to the leaders of the Senate and House of Representatives. The letter stated, “The federal government’s attempt to impose price controls by regulating interchange through Section 1075 (Durbin Amendment) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was the purest example of a failed government policy. If the goal of the requirement that credit unions and banks enter contractual relationships with many payment networks was to reduce costs to consumers, then it failed. The Durbin Amendment has resulted in additional compliance burdens and related business costs to financial institutions, a reduction in interchange revenue, and a massive transfer of money to the largest retailers. Since the enactment of the Durbin Amendment in 2010, the financial services industry (comprised of institutions of all sizes and charters) has been clear, consistent, and in lockstep in our opposition to that destructive policy. The Durbin-Marshall bill manages to take a bad policy and make it worse.”

The bill limits these new proposed requirements to only institutions over $100 billion in assets, which would include only one credit union – the $166 billion Navy Federal Credit Union in Vienna, Va. That being the case, under the Durbin Amendment “community banks and credit unions still suffered a 30% decrease in their interchange revenue,” according to the joint letter to lawmakers.

According to a statement from Michael Powers, president/CEO of the $417 million Garden Savings Federal Credit Union in Parsippany, N.J., “The Credit Card Competition Act Bill being proposed is hardly consistent with a message of helping out the middle class. It is a bill that stands to benefit massive retailers and not the middle class, hard-working Americans that actually need help. It puts an unnecessary burden on credit unions and other financial institutions that will undoubtedly have a negative residual effect on the same people it is purportedly attempting to help. It is of the utmost importance that this bill does not advance.”

The proposed legislation closely reflects a bill from the last Congress, which did not move forward after NAFCU, CUNA and others pushed back against it.