CUNA's Bill Cheney comments on NCUA's Debbie Matz' letter to the Fed
05/05/2011 12:12 pm
Earlier this week, NCUA Board Chairman Debbie Matz released a letter she had written (dated April 29) to Fed Chairman Ben Bernanke to further the comments of the agency on proposed rules on interchange fees. The letter summarized an analysis the agency performed of some of the direct costs and income related to debit card transactions for credit unions of different sizes.
Regarding Chairman Matz' letter to the Fed, Cheney wrote:
Chairman Matz makes the point that exempting smaller debit card issuers, such as credit unions, from network exclusivity and merchant routing rules would be consistent with the congressional intent that credit unions not be adversely affected by the Interchange fee regulation. We urge Congress to take this action as soon as possible.
However, we find the agency’s estimates of debit card transaction costs for larger issuers to be significantly understated.
First, as was the case with the Fed’s previous costs study at large issuers, internal and/or indirect costs such as labor, equipment, overhead and fraud prevention are not included. These costs are significant, and the functions they cover are essential to the provision of debit services.
Second, it appears that the agency did not even include many of the direct costs that the Fed included in its analysis. Basic amounts paid to third parties for clearing, settlement and authorization amount to far more than the values reported by NCUA in the letter. It is inconceivable that the median cost at the largest credit unions -- those with a median asset size of $1.6 billion -- is only a third to a sixth of the average cost at very large banks (those with more than $10 billion in assets).
We question the methods used to derive these numbers and urge NCUA to revisit and revise them as soon as possible.