About UW Credit Union » Financials » Interchange Legislation

Action Needed

As a credit union, our business is your business. I'm urging you to contact your representatives by visiting www.capwiz.com/cuna and to ask them to delay implementation of the Federal Reserve's debit interchange rule and study its implications before proceeding.

Tell your Representatives to Reevaluate Interchange Legislation

April 13, 2011

Dear Members,

As part of the 2010 Wall Street Reform Act, planned changes to the debit card payment system have the potential to dramatically increase the fees consumers pay for financial services. Merchants pay a market-set interchange fee to banks and credit unions to support the debit card payments they receive. This interchange fee provides payment benefits to merchants that include guaranteed funds, fraud protection and predictable settlement. The fact is, the bulk of the expense of maintaining card programs is borne by banks and credit unions, not merchants. And many could not offer debit card programs without interchange fees to help cover their costs.

While the amendment currently exempts financial institutions under $10 billion in assets, the Consumer Federation of America and the Federal Reserve have both recently raised concerns that the Act's exemption for credit unions and community banks will not be realized in practice.

It's important for consumers to understand that many financial institutions, including UW Credit Union, would have to impose additional fees to maintain their debit card program if interchange fees are reduced. Our spring 2011 member newsletter features an article on debit card costs and the Wall Street Reform Act. In addition, the chart below outlines the responsibilities of card issuers and merchants, and the key benefits that debit cards, supported by interchange fees, provide to each.

UW Credit Union Merchant
Responsibilities as Card Issuer
  • 100% of card issuing expense
  • 100% of card operating expense
  • Majority of fraud losses
  • Statement & call center
  • Cost of maintaining related checking accounts
  • Average of $0.44 interchange fee to card issuer per transaction
Benefits (to members)
  • A safe, easy way to pay for goods & services
  • Limited liability on fraud
  • Worldwide & universal acceptance
  • Immediate & guaranteed payment; responsible for no fraud losses
  • Consumer convenience & safety
  • Increase in goods & services purchased
  • Lower costs handling checks, currency & related losses

UW Credit Union supports strong consumer protection policies and is committed to business practices that are transparent, honest and straightforward; however, this provision of the Reform Act was not thoroughly considered and will result in higher costs in order to support our debit card program. Whatever result develops in response to the new regulations, you can be assured we will work to minimize the cost we must pass on to our members, keep fairness a priority and remain competitive in the market.

As a member owned cooperative, our business is your business, so it's critical for our members to voice their concerns to elected representatives about the need to maintain a fair balance in card interchange. Merchants receive substantial benefits when they choose to accept debit cards as a form of payment - all supported by interchange fees.

On behalf of UW Credit Union, I am urging you to contact your representatives today by visiting capwiz.com/cuna and ask them to delay implementation of the Federal Reserve's debit interchange rule and study its implications before proceeding.


Paul Kundert
President & CEO



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