Press
CUNA files amicus brief in Florida interchange case
WASHINGTON, DC (March 5, 2015) — CUNA filed an amicus brief today in the U.S. Court of Appeals for the Eleventh Circuit, in a case raising many of the policy issues surrounding credit card interchange fees. CUNA believes allowing merchants to add additional surcharges to credit card transactions would allow merchants to shift the cost of these payments to consumers and financial institutions, while still receiving the substantial value of participating in the system. CUNA’s amicus brief can be viewed here.
Interchange fees occur when a credit card transaction takes place, and are how credit unions are compensated for making cards available to merchants. Merchants receive a number of benefits from participating in the credit card system, including being able to keep staff levels low, allow for transactions at any time (through automated or online processes), as well as being protected from fraud and insufficient fund losses.
“Credit unions face numerous costs by offering and processing credit cards, and have limited chances to recoup those costs,” said CUNA’s Robin Cook, senior director of advocacy and counsel for special projects. “Funds generated through credit card programs are able to subsidize other consumer-friendly products at credit unions, such as free checking accounts, as well as fraud protection and technology costs for settling transactions.
Higher transaction volume means incremental costs go down. A surcharge on credit card transactions may lead to consumers avoiding the surcharge, and instead use other forms of payments. This would present a problem for credit unions that use interchange fees to fund their card and other programs.
“Funds generated through credit card programs are used to subsidize other consumer-friendly products at credit unions, such as free checking accounts,” said Cook. “These programs help bring more consumers into the financial system. Surcharging could mean fewer consumers would have access to basic financial services. This is exactly what happened after the Durbin Amendment.”
Surcharging was prohibited under federal law until the statue expired in 1984. After that, Visa and MasterCard banned surcharging as part of their network agreements. A 2013 antitrust case caused the bans to be removed from those agreements, making the state bans more relevant.
Three other cases across the country are pending, in New York, California, and Texas, all involving similar arguments as the Florida case. The New York Credit Union Association has filed an amicus brief for the case in that state, which is under appeal. The Texas district court has ruled surcharges to be unconstitutional, and the California case is still pending.