Momentarily, credit unions across the country saw a glimmer of hope when the Federal Reserve suggested that the Tester-Corker Bill (an offshoot of the Durbin Amendment) should be studied before passed.
However on Wednesday, June 8 that hope was shattered as the Senate shot down any prospect of slowing down or stopping the Amendment from passing. In the end, the vote was 54 to 45--six shy of having the Amendment delayed.
Charles Roach, Cedar Point Federal Credit Union CFO says, "I thought they would postpone implementation when the Fed came out and asked for it."
East Idaho Credit Union's President/CEO LaMont Hanson says that Senators are passing legislation that they don't fully comprehend.
"My opinion is they really don't understand the consequences to smaller institutions. What consumers will end us seeing is an eventual decrease in dividends and interest rates."
He speculated that credit unions might have to eradicate some of its community or charity programs to make up for lost income.
"We may have to do away with some of the programs we contribute fairly greatly to such as the Children's Miracle Network. We typically give money from our Skip-a-Pay program to networks like that however, if it comes down to trying to survive, we may no longer be able to do that, which is extremely disappointing."
Products Like Free Checking May Become a Dinosaur
Hanson adds that the Interchange income reduction will force the credit union to take a hard look at free checking or free debit cards.
"It will impact our bottom line depending on when the new structure goes into place...certainly it will affect our members substantially. Ultimately we'll have to find another $900,000 worth of income somewhere else. For an institution that is already paying out several hundreds in NCUA premiums it will be difficult to replace lost income. Don't forget, credit unions also have to still have to pay for the fraud in the debit card area. That can add up to thousands of dollars for one breach of security."
Roach adds, "We are adverse to charging fees but the reality is we'll see a significant reduction in income and there won't be a change in operating expenses. We are going to be forced to look at fees."
Consumers Will Ultimately Pay the Price
Both Roach and Hanson echo the sentiment that it's not the banks, credit unions or merchants who will pay, but the consumer.
Hanson says, "My problem is the consumer will ultimately suffer because I doubt merchants will decrease their cost of products. There is no obligation to merchants to pass along savings to customers so customers won't see any benefit."
Roach wonders if legislatures believed that retailers would reduce prices in the event they earned more cash per transaction. "There will be no compromise. Nowhere have retailers stated that prices will drop. Ultimately, retailers will not reduce expenses, and financial institutions will be forced to alter fee income products to make up for revenue."
Hanson likens the government move as its way of punishing the big banks for bailouts. "One of the big points was the fact that the American people had bailed out the big banks and now its time for the big banks to repay the American public."
"When you think about it, the small financial institutions didn't take any taxpayer money in bailout yet we're still stuck with fallout from larger institutions."