Fed proposal is threat to consumers, card issuers, payments system
America’s credit unions vehemently oppose any regulation or legislation that would impact the operation of credit or debit cards, CUNA wrote to the Federal Reserve Wednesday. The Fed proposed a rule to require debit card issuers to offer two unaffiliated networks which must also be capable of processing transactions under a new framework of expectations surrounding merchant type, transaction and location.
“The proposed changes will likely accelerate the decline in revenue from debit card transactions while increasing compliance costs associated with the requirements to ensure that all possible debit transactions have two card networks available,” the letter reads. ‘’Furthermore, adding layers of unnecessary complexity onto the debit card networks can only increase cybersecurity risks. These costs and reductions of revenue will likely further accelerate the loss of locally owned and operated cooperative credit unions, which can make the delivery of financial services to those of greatest need even more challenging.”
The letter notes that extending Durbin Amendment routing requirements to the credit card market would be a “disaster,” as the two products that use different networks.
“A debit card allows one to access their own funds, while a credit card allows for instant access to a loan and does so over a network that was singularly developed for this purpose,” the letter reads. “The possibility of requiring Durbin routing requirements to the credit market will cause the cost of these low-cost loans to increase, leading to less spending power for consumers and possibly the reduction in important credit building and educational programs offered by credit unions.
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