Unanswered questions on amendments could cause unintended consequences (The Macon Telegraph)

Sunday, June 6, 2010

By MIKE MERCER - Special to The Telegraph

A controversial amendment in the Senate Financial Reform Bill pending in Congress should be a big concern for consumers and needs to be taken out. It has to do with debit interchange fees, which are what merchants pay to financial institutions for processing customers’ debit card transactions. These small fees help cover fraud, data security and operational costs of running the program.

At the 11th-hour, the Senate added an amendment to the bill that enables the government to set restrictions on interchange fees with no assurances that consumers would benefit. Georgia Credit Union Affilates believes the Senate amendment should be separated from the Financial Reform Bill and debated on its own merits.

Why? There are simply too many unaddressed and unanswered questions in this hastily prepared add-on. Among the issues that need to be considered:

- As long as plastic cards have been utilized, interchange fees have been set by the networks, such as Visa, MasterCard, Discover, American Express and others. They have to balance the interests of both merchants and financial institutions: charge too much and stores will not accept the cards; charge too little and financial institutions will not offer cards to consumers. The amendment calls for the Federal Reserve Bank to set restrictions on interchange fees. What factors will the Fed use to set the interchange rate? Will it cover all operating costs such as fraud, card issuance and call center operations?

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Mike Mercer is the president and CEO of Georgia Credit Union Affiliates.