Your article ("Congress Won't Delay Durbin Amendment," June 8) stated that no credit unions or banks have listed their card processing costs. I recently wrote an editorial to our local newspaper, which was published April 11. I have included it below. I researched our small program (we are an $18-million institution) and found that at $.12 per transaction for interchange fees, our program would end up costing us $.05 cents per transaction. The retailers are having a heyday with this issue. I wish a substantial institution would step up to the plate and make a solid point about what this regulated reduction in fees will do to all of us. We are allowing the retailer organizations to tell our story. How the heck do they know what it costs banks, credit unions, or the VISA and MasterCard networks to run these transactions? And if the retailers are right and the processors and big banks are overcharging, then we are all getting ripped off.
Below is a copy of the editorial I wrote that appeared in the Billings Gazette (Montana) on April 11:
Ever wondered why you see more and more signs in restaurants and retail businesses saying personal checks will no longer be accepted? Have you ever wondered why your favorite retailer loves to see your debit card?
One likely reason is debit cards pose little or no risk to the retail merchant. The total risk lies with the financial institution. If the merchant accepts the card, whether they attempt to verify identification of the user or not, they get their money. Card networks require credit unions/banks to guarantee funds. The merchant always gets paid. The assumption of risk lies totally with the issuing financial institution. Yet retailers demand financial institutions accept a reduction in debit card interchanges fees.
Our local credit union averages $.07 of net income per debit card transaction. Expenses include card plastic production and mailing costs, card networks' transaction fees, card processor monthly processing and database maintenance fees, ATM network access fees, VISA network fees, communication costs, fraud prevention and security fees, and card program insurance coverage. Estimating employee time spent setting up, ordering, maintaining, and trouble-shooting card programs further reduces net income.
The proposed rule excludes institutions under $10 billion in assets, but large financial institutions could make deals with retailers for increased savings for only accepting certain bank issued debit cards. Consumers' choice for banking services could be limited by such deals.
Restricting interchange fees to $.12 per transaction would change card programs like ours from a minor profit center to a considerable expense. To maintain a debit card program in this environment, smaller institutions would be forced to cover the expenses with user fees, creating more negative affects for consumers.
Sherry Essmann, CEO
Montana Health FCU, Billings, Mont.