WASHINGTON–America’s Credit Unions is again asking the Federal Reserve to withdraw its proposed interchange rule, saying a recent court decision complicates how it could be administered.
As the trade group noted, a district court invalidated the Fed’s Regulation II interchange fee standard in August, finding it unlawfully allowed recovery of costs beyond the incremental authorization, clearance, and settlement costs specified in the Durbin Amendment.
America’s Credit Unions wrote to the Fed outlining its concerns, stating “the court’s ruling complicates the administration of any future rule based on the Board’s 2024 proposal which is premised on the assumptions about allowable costs (i.e., categories other than incremental ACS costs) which are likely to be part of the ongoing litigation.”
‘Unsolved Issues’
In addition, the letter states argues that although the court indicated its ruling would not preclude issuance of a final rule, “the defects identified by the district court would remain unresolved, and proceeding with a final rule on such shaky ground would only create confusion for industry while granting a windfall to merchants, who would reap unjust cost savings from a rule that is both unlawful (by the district court’s reasoning) and subject to concurrent litigation in a different circuit.”
Longstanding Concerns
As the CU Daily has been reporting, America’s Credit Unions repeated in the letter its longstanding concerns with the interchange proposal itself, as it is “predicated on flawed methodology that disregards the cost experience of most issuers,” especially smaller credit unions, the trade group said.
“The ultimate effect of reducing interchange revenue will be felt mostly by the member-owners of credit unions who will see a reduction in the availability of affordable banking products and services,” the letter reads in part.
The full letter is here.
‘GLBA Should Remain the Model’
Separately, America’s Credit Unions told the House Financial Service Committee that with data security a signficiant issue of concern, the Gramm-Leach-Bliley Act (GLBA) should remain the model for credit union compliance with any future federal data security and privacy standard. The trade group shared its input with the committee here in response to a request for information on legislative proposals to address consumer financial data privacy.
In its comments, America’s Credit Unions called on Congress to prioritize the following features in a future data privacy framework:
- A recognition of GLBA standards and accompanying regulations in place for financial institutions through the adoption of an entity-level exemption;
- Strong federal preemption from the myriad of various state laws for those in compliance with national privacy and GLBA standards; and
- Protection from frivolous lawsuits created by a private right of action.
America’s Credit Unions also encouraged the House Financial Services Committee to “collaborate closely” with the House Energy and Commerce Committee to “ensure that any federal privacy legislation builds upon and strengthens the GLBA while firmly preempting state laws.”
The CU trade group said it supports the expansion of the definition of “financial institution” to include fintechs, data aggregators, and decentralized finance companies that handle nonpublic personal information, and cited the Kentucky Consumer Data Privacy Act as an example of a “clear and concise entity-level GLBA exemption that should serve as the model for federal legislation.”
