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March 9, 2011 – Sen. Jon Tester, D-Mont., is crafting legislation to prevent the Federal Reserve Board's debit interchange rule from taking effect this July, and association lobbyists who have been working with him say a bill could be unveiled at any time.

"This would be a very positive development for credit unions, and we're hoping to see a measure introduced very soon," said Brad Thaler, NAFCU's vice president of legislative affairs.

For several weeks, NAFCU has been pressing for legislation to stop the Fed's proposed rule from taking effect in July. It has pointed out that the statute imposes no specific requirement on the Fed to write a rule that sets a price cap on interchange. In addition, the 12-cent fee cap that the Fed has proposed does not account for cost factors, such as fraud prevention, that could have been considered, and this will be particularly harmful to small issuers.

The act includes an exemption for issuers with less than $10 billion in assets, but regulators, including the Fed, have said it seems unlikely that a two-tiered system would emerge in the marketplace. Comptroller of the Currency John Walsh, in a comment letter to the Fed, and FDIC Chairman Sheila Bair have also warned of ill effects on card issuers in general. Indeed, Bair and Fed Chairman Ben Bernanke, as did Tester, aired doubts about the measure and the exemption in a Senate Banking Committee hearing last month on the Dodd-Frank Act.

More recently, John Buckley, president and CEO of Gerber FCU in Fremont, Mich., told the House Financial Services Subcommittee on Financial Institutions that his credit union's members would bear the costs of complying with the Fed's proposed interchange fee cap. Buckley, who delivered testimony on behalf of NAFCU, said if merchants don't accept members' debit cards because the credit union sets a higher interchange fee, members will find another way to pay.

Buckley's testimony has gotten broad play, with reports featuring his comments carried on the front page of yesterday's New York Times (and March 7 online, as "Debit Card Fees Prompt a Push Near Deadline"); in the American Banker; and in a March 3 article on Forbes' website.