ARLINGTON, Va. – A study released this morning by NAFCU shows that credit unions have increased their debit interchange revenues since last year’s enactment of the Durbin Amendment’s cap on interchange because of a rise in transaction volume, even though per-transaction fees have declined for many of them.
The new study shows almost 21% of credit unions reporting a decline in per-transaction debit income, even though the Durbin Amendment does not directly impact them.
But a clear majority, 53.1%, of credit unions surveyed, reported an increase in monthly income from debit, indicating that transaction volume has increased. Only 9.4% of respondents have noticed a decline in monthly debit income, while 37.5% have not noticed any change.
The Durbin Amendment, part of the 2010 Dodd Frank Act, capped interchange fees for credit unions and banks over $10 billion at 21 cents per transaction, less than half the average 44 cents paid before. Credit unions have argued the cap on the bigger institutions would effectively drag down the rates paid to smaller institutions because of market forces. Only three credit unions were over $10 billion last year, Navy FCU, Pentagon FCU and North Carolina State Employees' CU, so were directly impact by the Durbin Amendment.
Cards interchange is the biggest form of non-interest income earned by credit unions, earning them an estimated $5 billion last year, about $3 billion from debit and $2 billion from credit.
While gross income related to interchange fees may be rising, they are in many cases not sufficient to cover the costs of processing additional transactions, concluded the NAFCU study. Credit unions are considering a variety of measures to recover these losses, highlighting the unintended consequence of the Durbin Amendment.
The most common measure that survey respondents have taken or are considering is eliminating or reducing debit rewards programs (27.6%). Other options include eliminating free checking accounts (25.8%), reducing staff (12.9%) and charging members a monthly fee for access to a debit card (9.4%).
The new NAFCU study, based on a monthly survey of NAFCU members, has other good news for credit unions, finding an average of 92 basis points return-on-average assets through July, a five-year high, and that net income grew 7.2% on an annualized basis through July.