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Credit card settlement could impact credit unions

Late last week, Visa, Mastercard and a few large banks settled a class action lawsuit brought by a group of merchants concerning interchange fees. While the defendants in the lawsuit will pay the merchants billions in a settlement, credit unions will be affected by a required reduction in credit card interchange rate fees.

CUNA says the reduction in credit card interchange rate fees, which are expected to be 10bp for an eight-month period possibly by mid-2013, will most likely cost credit unions $50 million. This would apply to all credit unions that have a credit card program. It would not apply to those credit unions that do not offer credit cards.

CUNA Chief Economist Bill Hampel made the estimates based on an interchange rate fee reduction of $1.2 billion for all financial institutions. This loss would be concentrated among the relatively small number of credit unions that have very active credit card programs, he noted.
Other aspects of the settlement include:

  • Visa, MasterCard and the banks would create a $6.05 billion fund (a record amount for a class action settlement) to repay retailers for past fees charged.
  • Retailers would be permitted to assess "check out" fees or surcharges on credit card purchases, which has previously been prohibited by Visa and Mastercard rules.

CUNA President/CEO Bill Cheney said that the surcharging aspect of the settlement--as well as the provision that consumer-owned credit unions would see a reduction in interchange revenue-- are signs that the settlement does nothing for consumers.
"We all know that interchange revenue enables credit unions to provide essential and cost-effective credit card services to their consumer members. We also know that the temporary reduction in interchange revenue that credit unions will experience will not likely find its way into the pockets of consumers, but will more likely into those of merchants," Cheney said.
You can read the full CUNA story by visiting the CUNA website.