An evaluation by credit unions on the financial impact of debit card
reform on the industry is incomplete and misleading and contradicts
other major studies on the topic, said the Merchants Payments Coalition
today, a group concerned about rising credit and debit card swipe fees.
Despite the fact that recent reports by four independent entities - the
Government Accountability Office, Federal
Reserve Board, the
Federal Reserve of Kansas City and the
Federal Trade Commission (FTC) - have shown that small financial
institutions, including credit unions, have benefited from the Durbin
Amendment, the Credit Union National Association (CUNA) claims credit
unions have been negatively affected. CUNA is citing its own "CUNA Debit
Interchange Survey," which has not yet been published or verified.
The Durbin Amendment encouraged more competition in the debit card
industry and reduced by half debit card fees collected by big banks,
exempting all banks with under $10 billion in assets.
The "CUNA Debit Interchange Survey" doesn't actually say whether credit
union debit revenues have increased or decreased since debit reform
started. Instead, it compares two quarters -- both of which were
post-reform -- and shows that revenue went up in one of the quarters and
down in the other quarter. Plus, CUNA evaluated only a small percentage
of credit unions and omitted several important factors resulting in
misleading findings. Data from only 150 credit unions out of 230 that
participated in the survey has been used, according to CUNA's chief
economist Bill Hampel, leaving out a lot of crucial data.
More tellingly, the FTC found that credit unions had done quite well
since reform even though CUNA shared
its survey data with the FTC before
the release of the FTC's study.
"This survey is incomplete and misleading," said Doug Kantor, MPC
counsel. "Every reliable source indicates that small banks and credit
unions have been better able to compete with big banks since debit
reform started. CUNA is not in step with reality."
CUNA estimates the decrease of swipe fee revenue in the third quarter of
2012 to be around $1.38 million for all credit unions (about $8,900 per
credit union) but does not indicate whether that is actually more or
less money than the same quarter of the previous year nor does it say
how this total could be affected by the omission of the 32% left out of
the calculations and does not consider or mention the increase
of swipe fee revenue in the second quarter of 2012, said Doug Kantor,
MPC counsel. See here
for more detail.
The most recent study from the Federal Reserve of Kansas City found
debit reform has had little if any impact on small banks' revenues.
Excerpts from the study
are below:
" . . . nearly all debit card networks have set separate interchange
fees for regulated banks and exempt banks, creating a two-tier fee
structure after the regulations took effect. The regulations forced
the fees down for regulated banks, but the average fees for exempt
banks changed little after the regulations took effect in the fourth
quarter of 2011." (p.90)
"Regulated banks have seen their interchange fee revenues fall while
exempt banks' revenues have remained roughly the same, on average."
(p.108)
"Community banks and credit unions have reacted with a range of
tactics. Some have offered monthly rewards to prospective customers
for opening a checking account. Others have offered cash back for
every debit card purchase made by customers during a specified period.
Yet others have publicized offers of free checking accounts, with no
requirements and no debit card fees." (p.103)
Swipe fees for both debit and credit cards were more than $50 billion in
2011, costing U.S. households more than $400 that year. The fees are
eight times higher than in Europe. Numerous surveys
and industry
experts have found no negative impact of the debit reform and
revealed it leveled the playing field for small institutions that were
disadvantaged by the debit system as it had been dominated by big banks.
