As a quick review and synopsis of last week’s blog, my belief is that consumer banking costs will go up as a by-product of Senator Durbin’s interchange amendment. Therefore, I don’t want the amendment to pass, and have said as much to whoever will lend me an ear. Some have disagreed with my stance and have called me names as a result. Oh well, my motivation is principled in the protection of the consumer. If that results in name calling, so be it.
Remember, Senator Durbin believes that there should be “negotiation of interchange rates by and between merchants and card issuers.” That appears to be code for “lower the interchange income for banks, credit unions and other card providers in order that retailers can reduce their expenses.” The Senator’s plan is flawed.
Again, from last week’s blog, the interchange savings at the check-out counter is not going to show up in our pockets. The reduction in interchange expenses will not go to consumers. It will go to the business owners and stockholders of those businesses. Thus, for those of us keeping score, consumers lose on two fronts: (1) new banking fees; and (2) no savings at the cash register. HMMMM!
Here’s my quandary: I don’t want to pile on the consumer with new charges to make up for the lost revenue related to the newly negotiated interchange rate. The banking business model speaks in volumes as to how to recoup the lost revenue – NEW FEES – lots of them! But as a credit union, our model is not-for-profit. In other words, after we pay our operating expenses, pay you an above-market dividend and put some money in the cookie jar for a rainy day, we return the remainder of our earnings to you and your fellow members in programs, services, products, facilities, technology, lower loan rates, higher savings rates, and really, really LOW FEES!!!!!
I want to keep it that way. But too much income stripped from the equation puts a real burden on St. Louis Community Credit Union to stay true to our philosophy, principles and values. Something has to give. If we lose hundreds of thousands of dollars (literally) in interchange income without a corresponding reduction in expense, there will need to be a change in thinking. The idea to cut programs, services, products, facilities, technology and/or adversely affect rates is gut-wrenching. Yet, the other option, i.e. to charge new fees, truly breaks my heart.
At a time when folks are reeling from a poor economy and all that comes with it, the last thing the good members of our community need is to pay brand new and/or higher fees. OUCH!
I’m apparently not alone in my concern. Right now there is a letter being circulated among the House of Representatives being signed (by both sides of the aisle) to eliminate the interchange amendment from the bill. Eighty-five legislators have already signed the letter. This coalition is led by Reps. Ms. Wasserman-Schultz (D-Fla.) and Mr. Marchant (R-Tx.).
Here’s what they say in the letter. “This language will devastate credit unions and community banks, while providing no discernable benefits for consumers.”
Without stopping this legislation, here’s what happens. The amendment passes and the credit union loses huge debit card interchange income. We do whatever we can for as long as we can to avoid hurting our members, but the likelihood of new and higher fees eventually comes around. You get mad at us for raising the fees, but where do you go? All financial institutions have done the same thing – most to a greater degree than us. So your debit card that is free today ends up costing you $20 or more per year. My heart is broken and you’re mad.
Remember, too, that the $10 item you purchase at the store will end up costing you more than $10. I’ll guarantee it.
Your anger, of course, will be misguided. But nowhere in your memory will you recall the onerous act of passing such an amendment in June/July 2010. Let’s avoid the inevitable outcome. Please join me in contacting your legislators to stop this amendment.