Fed Rules on Debit Interchange Today Posted by AVCU on 9:44 AM

Watch what will likely be a closing episode in the debit interchange saga today when the Federal Reserve Board receives, discusses and votes on a final rule that governs debit card interchange fees, fraud prevention adjustments, and routing and exclusivity restrictions. The Board’s meeting is scheduled to begin at 3:30 pm this afternoon and can be viewed via video feed from the Fed's Ustream channel. Click on the picture to connect at 3:30 pm. Before that time, older feeds are shown.

Documentation the Board will be reviewing is supposed to be available on the Fed website slightly in advance of the webcast.

Free Webinars: Regulatory Double Feature Posted by AVCU on 11:11 AM

As the regulatory environment continues to evolve within the credit union marketplace, it’s important to understand emerging regulations and how they impact your credit union and members. Mark July 19th on your calendar – that’s when CUNA Mutual will be offering two free Discovery Webinars (a double feature) on important compliance topics: lending regulation and health care reform.

“Hot Topics around Lending Regulatory Compliance” features CUNA Mutual Group's Director of Regulatory Compliance Bill Klewin. He kicks things off at 1:15 p.m. EST

“Navigate Heath Care Reform with Confidence” follows at 3:15 pm EST with Brad Pricer, Employee Benefits Senior Manager at CUNA Mutual Group. 

Choose to attend the session on regulatory compliance, health care reform – or both! Click here for more details and to register. 

Card Fraud Battle Continues: Who's at Fault? Posted by AVCU on 11:02 AM

The battle continues in the debate over who should increase their efforts to prevent plastic card fraud: merchants or card issuers. CU InfoSecurity features two articles focusing in on the back and forth.

"Pay at the Pump Fraud Grows" cites card skimming fraud popping up increasingly across the country. In response to growing press coverage of convenience store fraud, a representative of the National Association of Convenience Stores (NACS) claims that pay-at-pump skimming accounts for a low percentage of card compromises, but media attention has fueled public concerns. He goes on to say that "most convenience stores are concerned about pay-at-the-pump skimming, but they can only focus on so much."


In "Michael's Breach: Who's Liable" CU InfoSecurity reports on a Michael's customer's account being compromised to the tune of $1,300 after she made a $20 purchase at a Michael's store. She subsequently filed a class action suit. The article goes on to address the controversy over whether merchants or issuers should be assuming more responsibility. Merchants claim both share equally.

Free Webinar to Assist Members Affected by Floods & Other Disasters Posted by AVCU on 10:44 AM

A free national webinar to assist victims of natural disasters will be sponsored this Thursday at 12 p.m by the CU Association of the Dakotas. Titled “In the Face of Disaster”, the event will bring together a national panel of speakers who have direct experience with credit union disaster recovery efforts. The goal of the webinar is to educate and inform credit unions in three specific areas:

1. How can credit unions guide and direct members to FEMA resources?
2. What types of FEMA loans can credit unions offer to members who are rebuilding?
3. What type of risk model should credit unions use to anticipate loan defaults?

The webinar panel includes credit union executives with experience dealing with natural disasters (related to storm, wind and water damage) such as Hurricane Katrina, as well as professionals with more than 20 years of experience in the field of disaster planning, mitigations and recovery. Speakers include:

• Dawn Harris, EVP-COO of Campus Federal Credit Union in Baton Rouge, Louisiana
• Dave Mistick, President of Circumspex, a disaster recovery expert and consultant
• Amy Johnson, Director of Learning, Credit Union Association of the Dakotas

To register for this free event, click here.

Editorial: Fed Interchange Cap to Spur Debit Card Limits Posted by AVCU on 3:47 PM

In an American Banker editorial, Open Solutions CEO Louis Hernandez Jr. argues that the inability of debit card issuers to cover their costs of fraud and security may likely force those issuers to limit their exposure by putting a ceiling on debit card transactions at $50 or $100, forcing restrictions on services for consumers. Further, her argues, another unintended consequence of the Durbin amendment will be the disappearance of free checking. According to Raddon Financial Group Research, one-third of all households would switch their primary bank if it stopped offering a free checking account. The nation's biggest banks have all eliminated truly free checking so, at least in theory, this bodes well for community institutions. 


But hold up a minute. In order to offer free checking, Hernandez argues, a bank must have customers that bring in other business, or incur enough fees to cover the maintenance and servicing expenses on the account. These types of accounts used to be subsidized by accounts that generated significant non-interest income such as debit card interchange fees. The Durbin amendment severely alters the non-interest side of income, making free checking a loss leader product, and a burden that community banks will not be able to offset, forcing them to charge for checking.


Hernandez also points out fallout harm to the very businesses the Durbin amendment was intended to protect. A study experts from the University of Chicago Law School, the Brookings Institute and the MIT Sloan School of Management concludes that:

• Small businesses will face higher retail banking fees and the loss of valuable services as banks offset the loss of interchange revenue.
• Because of increases in banking fees, the number of unbanked individuals will increase, with many low-income individuals having to use higher-priced alternative financial service providers, such as check-cashers.
• The small businesses that see an increase in bank fees will not receive offsetting benefit from lower debt card interchange fees because they don't accept debit cards, but . . .
• Large retailers will receive a windfall of $17.2-$19.9 billion dollars in the first 24 months of the proposed rule being in effect.

To read more of Mr. Hernandez's thoughts click here.

IRS Increases Mileage Rates Posted by AVCU on 1:18 PM

The Internal Revenue Service announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional rates to calculate the deductible costs of operating an automobile for business and other purposes. The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011.

The IRS made this adjustment for the final months of 2011 due to recent increases in the price of gasoline. Normally, the IRS updates the mileage rates once a year in the fall for the next calendar year.

The optional business standard mileage rate is used to compute deductible costs of operating an automobile for business use in lieu of tracking actual costs, and also as a benchmark by federal government and many businesses to reimburse employees for mileage. 

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. The new rates are contained in Announcement 2011-40.

Purpose	Rates 1/1 - 6/30	Rates 7/1 - 12/31
Business	51	55.5
Medical/Moving	19	23.5
Charitable	14	14

Interchange Lawsuit to Fed: Release Reg Early Posted by AVCU on 10:37 AM

Minnesota’s TCF Bank asked a federal appeals court yesterday to order the Federal Reserve to provide the court with an advanced copy of the Fed’s final debit rule to be voted next week, in order to help the court deliberate over the bank’s suit to stop the rule.

Today's CU Journal reported the highly unusual court request by TCF Bank that the Federal Reserve be ordered to provide the court with an advance copy of the Fed's final interchange regulation, planned for presentation to the Fed Board next week. TCF's court case claims that the Fed's proposed regulation is unconstitutional. TCF estimates a loss of  $80 million per year in debit fees if the final rule is similar to the Fed's December proposal. It's court case claims this amounts to “confiscatory taking” under the commerce clause in the U.S. Constitution.

The unusual request by TCF in the Court of Appeals for the Eighth Circuit orders the Fed to furnish the court with an advance copy of its final rule, with no copy being seen by TCF, in order to help the appeals court decide whether the rule.

Lois Kitch: Foundation, REAL Solutions, WOCCU & More Posted by AVCU on 1:57 PM

National Credit Union Foundation REAL Solutions Program Director Lois Kitsch talks with CUBroadcast about the Foundation, REAL Solutions, past work experiences with the World Council of Credit Unions, and much more.

Promoting credit unions home and abroad with NCUF's Lois Kitsch... from CUbroadcast on Vimeo.

NCUA Pre-Paid Assessment: Free Audio Call Posted by AVCU on 8:22 AM

Next Monday, June 13th, CUNA is hosting a free audio conference on issues surrounding NCUA's proposal to allow credit unions to pre-pay some of their total assessments to the Temporary Corporate Credit Union Stabilization Fund. NCUA proposed the voluntary pre-payment in May is accepting public comment through June 20th.

The audio conference will address questions about NCUA's proposal. Speakers on the call will be CUNA President/CEO Bill Cheney, NCUA Deputy Director Larry Fazio, CUNA Chief Economist Bill Hampel and CUNA Deputy General Counsel Mary Dunn. The call will last one hour, 45 minutes of which will be reserved for questions.

An archived recording will be available a few days after the event. Read more details and register here.

$330k ACH Theft: Maine Bank Not Guilty Posted by AVCU on 7:38 AM

According to a report in BankInfoSecurity earlier this week, Maine judge John Rich ruled that Ocean Bank (owned by Peoples United) was not responsible for allowing hackers to steal more than $300,000 from Patco Construction Company's online account, saying the customer should have done more to protect the account credentials.


The case raises questions about how much security financial institutions may be reasonably required to provide commercial customers. It could set a precedent for liability in circumstances where customer systems are hacked and banking credentials are stolen. Small and medium-sized businesses around the United States have lost hundreds of millions of dollars in recent years to such activity, known as fraudulent ACH (Automated Clearing House) transfers.


Patco, a family-owned business in Sanford sued Ocean Bank after discovering that hackers were siphoning about $100K per day from its online account. The hackers sent a malicious e-mail to employees allowing them to install a password-stealing trojan on an employee computer. The hackers then used the credentials to initiate a series of electronic money transfers. Nearly $600K was transferred before Patco noticed.

After being notified of the fraud Ocean Bank was blocked about $240,000 in transfers. Patco was unable to retrieve the rest, so sued the bank for failing to notice the fraudulent activity and stop it. It argued that the out-of-character transactions should have drawn attention in the bank, who didn’t notice and let them go through. Ocean did not use multi-factor authentication. Ocean maintained that it had done its due diligence in verifying that the ID and password used were authentic.

The judge agreed the bank could have had better security, but said the law doesn't require “best” security measures available, and that the bank informs customers at sign up about the level of security it provides and the amount of liability it will assume if money is stolen. 

 Read the story in entirety in BankInfoSecurity.

Leahy: Senate Interchange Defeat to Put Money in Vermonter Pockets Posted by AVCU on 8:50 PM

Vermont Senator Patrick Leahy's comment on the Senate defeat of so-called swipe fee reform delays sought by credit unions: 

“Next month the Federal Reserve will implement long-overdue reforms to rein in excessive swipe fees that banks charge merchants whenever consumers use debit cards for their purchases.  These sky-high fees are hurting small businesses in Vermont and across the country, adding costs that mean higher prices for consumers.  I opposed this attempt to delay implementation of these new rules.  This vote is an all-too-rare victory for consumers and America’s Main Street economy.  Amid our fragile economic recovery, we cannot delay any effort to ease the burden on small merchants and hardworking Vermonters.

I supported adding these provisions to last year’s Wall Street Reform Bill, along with other reforms that I championed to ensure that small businesses can offer discounts to consumers for paying by cash instead of by credit card, and to make sure small businesses cannot be prohibited from setting minimum transaction amounts when cards are used.  These reforms will deliver pocketbook benefits to Vermonters.  Because of these reforms, Vermonters will no longer have to pay more for a gallon of milk simply because the credit card companies are demanding high fees on small transactions, or because banks will not let grocers offer discounts for cash over credit.”

To write to Senator Leahy go to  http://leahy.senate.gov/contact/

Welch Lauds Senate Kill of Interchange Delay Posted by AVCU on 8:36 PM

Vermont Congressman Peter Welch posted the following statement regarding the Senate defeat of debit interchange controls delay on his website:

"This is a long-overdue, good day for consumers and Main Street businesses. Visa, MasterCard and the big banks have been fighting ferociously to gut swipe fee reforms. Why? Because they want to maintain their unchecked monopoly pricing power that has for years allowed them to charge the highest swipe fees in the world. I congratulate Senator Durbin and those who withstood the withering pressure from big banks to preserve this important consumer protection.

Earlier in a "Roll Call" editorial column appearing the morning of the Senate vote on Tester's interchange delay amendment, Vermont Congressman Peter Welch slammed Tester's effort as a "kill" instead of "delay" measure, citing it as "a diversionary tactic that allows huge banks to maintain an unbalanced and unfair profit center at the expense of small businesses that are the lifeblood of communities in Vermont and throughout the country." Roll Call is the daily publication of DC legislators and staff.


Welch goes on to claim that:

• U.S. swipe fees are the highest in the world,
• Debit card swipe fees are 10 times what it actually costs to process the transaction
• Swipe fees add 1% to 3% to the cost of all goods and services, regardless of form of payment
• That claims that community banks and credit unions will be hurt are bogus, and
• That claims that merchants won't pass long the interchange windfall equates to "we’ve been doing such a good job ripping off consumers, we can’t let someone else do it!”

Read Welch's editorial in entirety here.


To write to Congressman Welch go to http://www.house.gov/formwelch/issue_subscribe.htm

U.S. Senate Debit Interchange Vote Results Posted by AVCU on 6:35 PM

Here's the result of this afternoon's vote in the U.S. Senate to delay and more closely study debit interchange controls as mandated by the Dodd-Frank financial reform legislation and proposed by the Federal Reserve.

YEAs ---54
Akaka (D-HI) Alexander (R-TN) Ayotte (R-NH) Baucus (D-MT) Begich (D-AK) Bennet (D-CO) Blunt (R-MO) Boozman (R-AR) Carper (D-DE) Coats (R-IN) Coburn (R-OK) Cochran (R-MS) Coons (D-DE) Corker (R-TN) Cornyn (R-TX) Crapo (R-ID) DeMint (R-SC) Gillibrand (D-NY)	Hagan (D-NC) Hatch (R-UT) Heller (R-NV) Hoeven (R-ND) Hutchison (R-TX) Inhofe (R-OK) Johanns (R-NE) Johnson (D-SD) Johnson (R-WI) Kirk (R-IL) Kyl (R-AZ) Lee (R-UT) Manchin (D-WV) McCain (R-AZ) McCaskill (D-MO) McConnell (R-KY) Mikulski (D-MD) Moran (R-KS)	Murkowski (R-AK) Nelson (D-FL) Nelson (D-NE) Paul (R-KY) Portman (R-OH) Risch (R-ID) Roberts (R-KS) Rubio (R-FL) Schumer (D-NY) Sessions (R-AL) Shelby (R-AL) Stabenow (D-MI) Tester (D-MT) Thune (R-SD) Toomey (R-PA) Warner (D-VA) Webb (D-VA) Wicker (R-MS)

NAYs ---45
Barrasso (R-WY) Bingaman (D-NM) Blumenthal (D-CT) Boxer (D-CA) Brown (D-OH) Brown (R-MA) Burr (R-NC) Cantwell (D-WA) Cardin (D-MD) Casey (D-PA) Chambliss (R-GA) Collins (R-ME) Conrad (D-ND) Durbin (D-IL) Enzi (R-WY)	Feinstein (D-CA) Franken (D-MN) Graham (R-SC) Grassley (R-IA) Harkin (D-IA) Inouye (D-HI) Isakson (R-GA) Kerry (D-MA) Klobuchar (D-MN) Kohl (D-WI) Landrieu (D-LA) Lautenberg (D-NJ) Leahy (D-VT) Levin (D-MI) Lugar (R-IN)	Menendez (D-NJ) Merkley (D-OR) Murray (D-WA) Pryor (D-AR) Reed (D-RI) Reid (D-NV) Rockefeller (D-WV) Sanders (I-VT) Shaheen (D-NH) Snowe (R-ME) Udall (D-CO) Udall (D-NM) Vitter (R-LA) Whitehouse (D-RI) Wyden (D-OR)

Not Voting - 1
Lieberman (ID-CT)

Senate Rejects CU Plea; Durbin Wins w/Leahy-Sanders Support Posted by AVCU on 4:19 PM

Despite a valiant effort by credit unions, community banks and other card issuers, the United States Senate failed to pass the Tester-Corker Amendment that would have delayed the implementation of the debit card interchange fee cap (mandated by last year's so-called Durbin amendment). The Amendment also called for study of the issue and its impact on consumers and community financial institutions. Sixty votes were needed to pass the Amendment; the vote failed on a 54-45 tally.

Much of the banter on the Senate floor today was between Senators Durbin and Tester. The former arguing against perceived abuses by mega banks toward merchants, and the latter in favor of protecting community banks and credit unions. Although credit union desires weren't successful, some points to keep in mind are . . .

• Over 1/2 of the Senate voted in support of further study before implementing interchange controls.
• That's 2/3 more than those who supported us in last year's Durbin amendment vote.
• Some Senators voting against the Tester-Corker amendment said they wanted to first see the final Fed regulation, and that they would assist after it is published.
• Considering the heated debate we generated on the issue, it's likely safe to say that legislators won't have the desire to challenge credit card interchange for some time to come.
• Opponents to the Tester amendment, like Vermont Senators Sanders and Leahy are so adamant that credit unions are protected by the so-called carve-out for institutions $10B and below that we have the opportunity for them to press the Federal Reserve to insure it will work in the final regulation, and to press them to act if it does not.

Clearly, today's Senate vote is disappointing, but there are still many unknowns. What do you think will happen to the debit payments system? Will VISA and MasterCard abide by Congress' desire for two interchange tiers? Will local Vermont merchants try to steer customers to lower interchange mega bank cards? Tell us your thoughts.

Final Push On Interchange Delay - Contact Senators Now Posted by AVCU on 12:30 PM