Regulatory Update: Debit Interchange Reduction Proposal

Posted by Gracie Nelson on May 13, 2024

Over the past few months, GoWest has been diligently collecting credit union feedback, discussing strategies, and crafting a comprehensive response to the proposed changes that would directly reduce debit interchange income on credit unions over $10B in assets by approximately 30%, as well as, indirectly negatively impacting those under $10B. 

Our initial draft aimed to address concerns regarding reduced debit interchange income and the disproportionate impact on smaller institutions. We circulated this draft among credit unions that would be directly affected. The feedback was positive, affirming our approach and the direction of the advocacy efforts. The initial feedback from credit unions helped us refine our arguments by aligning our collective viewpoints and ensuring that our concerns were clearly articulated. 

After early revisions, the Regulatory Advisory Committee did a comprehensive review and work session. Committee members came together in a work session making key suggestions including that we strengthen our legal argument focused on a tiered approach and revise the argument related to raising the threshold to be a congressional ask. 

At the heart of our letter is a legal argument emphasizing the Federal Reserve’s responsibility to implement a tiered system. This system is crucial for ensuring that all entities, regardless of their size, can recover the full costs incurred in debit card transactions. Our argument highlights the need for a balanced approach that applies the law equitably to smaller financial institutions over $10 B in assets but far smaller than the multi trillion that make up the nation’s largest financial institutions. 

 In our letter, we urged Congress to take the following key actions: 

• Urge Congress to eliminate the Durbin Amendment as it is no longer relevant in a rapidly evolving payments ecosystem. 
• Create a tiered interchange system that would be a more faithful execution of the statutory intent, ensuring that fees correspond more closely to the varied costs of different institutions. 
• Urge Congress to raise the exemption threshold to account for the significant asset growth of smaller financial institutions that were never intended to be subject to this rule. 

Your input was invaluable in shaping our final letter, and we thank you for your contributions. As of this weekend, GoWest submitted our Interchange comment letter to the Federal Reserve. This letter represents the collective voice of our credit union community and outlines our stance on this critical issue. 

Thank you again for your support and input. GoWest is dedicated to proactive regulatory engagement that protects credit unions and their members. We will keep you updated on any developments regarding this matter.  Read the letter submitted by GoWest.

Posted in Advocacy on the Move, Regulatory Advocacy.