WASHINGTON–A CU trade group representative and a CU CEO who testified in Massachusetts this week on proposed legislation in the Commonwealth around interchange, said the issues raised during the hearing go far beyond just the Bay State and could have significant “unintended consequences.”
Jason Stverak, chief advocacy officer for the Defense Credit Union Council (DCUC), who testified before the Massachusetts legislative commission examining interchange policy on behalf of defense credit unions, called the hearing in Massachusetts a “thought-provoking, not politically driven conversation.” He was joined by Peter Rice, president and CEO of Hanscom FCU.
“This is not primarily a conversation about interchange; it’s one about trust. Every time a consumer taps a card at a local business, the consumer believes three things: their information is safe, their money is safe, and if something goes wrong, someone will make it right. This is the foundation of modern commerce,” Rice told the commission. “But we need to ask a simple question: who will pay to protect that trust?”
What FBI Data Reveal
Rice told the commission that according to the FBI, Massachusetts residents lost nearly $339 million to cybercrime in 2024 alone.
“Banks and credit unions refunded that amount of money. It’s a cost that we should not forget as we consider this legislation,” he said. “When the fraud occurs, community financial institutions answer the phone, investigate the claim, absorb losses, and restore confidence. The credit union sees the victim, and the federal law requires us to make them whole.
“Imagine Massachusetts required National Grid to build power plants, maintain transmission lines, restore service after storms, invest in cybersecurity, comply with regulations, and keep the lights on,” Rice continued. “Then imagine lawmakers decided that part of National Grid’s revenue should instead be redirected to retailers. Most people would immediately recognize the problem. National Grid would still carry the responsibility, the risk, and the costs, but someone else would receive part of the revenue. The payment system works the exact same way. Supporters of this legislation argue reducing interchange costs will lower prices for consumers, and this is a very worthy goal, but Congress already conducted a similar experiment through the Durbin amendment. Free checking fell from 60% to 20% nationally. Monthly checking account fees increased from $4.34 to $7.44. Minimum balances increased by 25%. And according to the study by the Richmond Federal Reserve, only 1% of merchants reported actually lowering prices. The costs didn’t disappear; they simply moved.”
‘Unintended Consequences’
As the CU Daily reported here, Stverak told the commission efforts to regulate credit card interchange fees could have unintended consequences for credit unions, military families and the broader payments system.
Stverak said Rice’s testimony shared not just the effect the interchange legislation would have on military institutions but the entire community, as well as other states in which the credit union has branches.
Proposals Across Multiple States
Stverak said the association continues to watch interchange not just in Illinois, where enactment of the Interchange Fee Prohibition Act has garnered significant attention and which has been delayed for one year until July 1, 2027, but also in Delaware, New Jersey, Pennsylvania and New York.
But initiatives in all those states could be affected by recent rulings by the OCC and NCUA that reaffirms a federal preemption over state interchange laws could have implications.
Threat to Dual Chartering
Asked by the CU Daily what those rulings might ultimately mean, Stverak responded that legislators need to be aware that when federally chartered banks and credit unions are no longer part of the discussion, “then all you have left is the state banks and the state-chartered credit unions and you’re essentially trying to change an entire payment system for maybe 3% or 4% of the transactions that will happen within your state. That’s an incredible burden that we would have to carry and I think should pause the members of the legislature in moving forward, but many of them are likely still moving forward.
“The retailers, the NFIB, the restaurants, associations and others are saying that this is so important that they’re going to continually push forward on the topic,” Stverak continued. “But where I think that it creates another argument, and it’s one we addressed up in Massachusetts, was the fact that if you go down this road one of the strengths of America’s financial system and structure is our dual charter system. If you are going to create (a situation like) in Illinois and in other states, where you have an unequal field between state and federal charters and you make it more attractive to transfer and become a federally chartered credit union just to be able to compete because of all the hindrances and additional regulations, you’re going to see a transition away from state charters to federal charters.
‘Undermining’ System
“That’s going to undermine the strength of the credit union system across this country.”
Despite that argument, Stverak said he doesn’t believe the rulings by the OCC and the NCUA will slow down efforts by the retailers to push the interchange legislation.
