Interchange Rate Caps for Large Issuers Creates Opportunity For Credit Unions to Expand Market Share

News Release Contacts:

Merry Pateuk
PSCU Financial Services, Inc.

St. Petersburg, FL, June 29, 2011 – The Federal Reserve Board today released the final language of Regulation II, governing debit interchange and routing rules:

  • The Board expanded its definition of allowable costs and increased the interchange fee standard. The interchange cap is now set to $.21, plus 5 basis points for fraud loss and an additional $.01 for fraud prevention.
  • Although the rules did not guarantee the small issuer exemption, the Board is including a statement committing to periodic studies of the rule’s impact to the rates for exempt issuers.
  • The debit interchange rules will go into effect on October 1, 2011, instead of the original proposed date of July 21, 2011.
  • Network exclusivity rules will require that all issuers enable at least two unaffiliated networks without regard to the authentication method:

                    o   Merchant routing rules are scheduled to go into effect October 1, 2011

                    o   Issuer exclusivity prohibition is scheduled for April 1, 2012.

“The Federal Reserve Board acknowledged what we have been saying all along—that merchants are not required to pass along the effect of lower interchange fees in the form of lower prices to consumers. The prospect of reduced interchange rates for large banks has already prompted them to increase fees. While this can negatively impact consumers, it is a bonus for credit unions because it makes their debit cards even more attractive,” said Michael Kelly, President and CEO, PSCU Financial Services. “Now is definitely not the time for credit unions to raise fees on checking or debit offerings. Credit unions need to seize this opportunity to win market share from banks by attracting members with these loyalty-driven products.”

“Debit continues to be a safe, efficient and preferred payment method for both consumers and merchants,” Kelly added. “PSCU will continue its vigorous campaign to ensure that the Federal Reserve Board studies—and reports—the rule’s impact on interchange rates for smaller exempt issuers.

PSCU Financial Services provides industry-leading products and services to increase deposit acquisition, expand debit programs, optimize network relationships and cross-sell services such credit cards, reloadable prepaid cards, and online banking.

About PSCU Financial Services

Based in St. Petersburg, Florida, PSCU Financial Services is the nation’s largest credit union service organization (CUSO) and serves more than 1,500 financial institutions

nationwide. As a non-profit cooperative, the company is owned by more than 680 member credit unions representing 16 million credit, debit, prepaid, online bill payment and electronic banking accounts. Its Contact Centers handle more than 18 million inquiries a year.

PSCU Financial Services offers 24/7 member support through four Contact Centers: its Eastern operations center in St. Petersburg, Fla.; a Western operations center based in

Phoenix, Ariz.; and two call centers in Detroit, Mich. These Contact Centers perform member servicing and new member acquisition, cross-selling and automated lending solutions as well as support for debit/credit/prepaid cardholders, online bill payment and electronic banking subscribers.

Established in 1977, PSCU Financial Services offers its members a full range of processing options, any combination from full service to in-house pass through processing for credit, debit and ATM transactions. As a leader in the credit union movement, the company offers gateway

access to national and regional networks. It also provides full function ATM terminal driving services. For more information, visit PSCU Financial Services’ website at

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