As Iowans, we work tirelessly to keep our local communities thriving. With the help of financial partners like credit unions, consumers across the state can keep more of their hard-earned money and find the best product or service to fit their needs. However, this may change if the Federal Reserve’s proposed changes to Regulation II (Reg II) go into effect.
Reg II focuses on the debit interchange fee cap and would slash interchange fee revenue by 30%. Interchange exists to cover the costs of a transaction, along with the skyrocketing costs of fraud. Interchange regulations have significantly harmed consumers already, and this would lead to further reductions of products and services offered by credit unions nationwide.
Unfortunately, the dollar has already been stretched thin for Iowa families, and Reg II will now impact consumers’ access by requiring financial institutions to transition from free checking accounts to accounts that charge monthly maintenance fees simply in order to cover costs.
Fortunately, our own Congressman Zach Nunn has flagged the proposal’s impact on Iowans. I want to thank him for supporting HR 7531, the Secure Payments Act, which would delay finalization of this proposal until a thorough study and impact analysis is conducted on its potential effects.
The notion that these changes will benefit consumers doesn’t align with past experience. Studies have shown that such savings are rarely passed down to consumers. In fact, the Richmond Fed found that only 1% of merchants passed their savings on to consumers through reduced prices.
It’s time for the federal government to check its work before pushing ahead with more major regulatory changes. Until an impact analysis is conducted on the government’s price caps on interchange, consumers will suffer the consequences and it will be even more challenging for credit unions to effectively serve our members.
Greg Hanshaw is President & CEO of Community 1st Credit Union. (Photo submitted)
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