Make sure that what you ask for is what you really want!!

Make sure that what you ask for is what you really want!!

I recently spent two days in Washington DC working to advocate for reasonable regulatory oversight and protect the rights of credit unions so we can continue to offer our members Business Loans. I am still amazed at how accessible our elected officials are in light of the difficult and challenging times they face in leading our nation. However, I also am saddened by the lack of progress on key issues that will create jobs and expedite the nation's recovery.

We must join together with one voice demanding a focus on creating a strong and vibrant national economy. One of the things that was glaringly evident is that the onslaught of new regulations is making the problem bigger rather than solving the nation's ills. With over 4,000 new regulations, businesses of all sizes are now spending more time ensuring their survival by complying with these, oftentimes onerous, regulations instead of focusing on creating greater value for the their customers and owners. This is no different for your credit union... and we have to create a sense of urgency with our elected officials in slowing down the regulatory onslaught. Fortunately, our freedoms and political structure allow us to speak directly with our elected officials like I was able to do over the last couple of days.

However, I am pretty boisterous over what I consider one of the worst pieces of legislation that I have seen in over 30 years of work in financial services. The Durbin amendment which caps debit card interchange fee income is already creating havoc in the financial markets and it has only just begun. This regulation was so bad that I never expected it to see the light of day, let alone be enacted into law. Unfortunately, it was rushed through under the guise of consumer protection. Yes, Bank of America deservers what they get for probably one of the worst public relations debacles in the history of financial services. Their announcement of their $5.00 monthly fee was executed as poorly as I’ve ever seen. Of course we as credit unions have benefited by their actions with an overwhelming response from former Bank of America customers choosing their trusted, local option Rogue Federal Credit Union.

The Occupy Wall Street protests are serving to bring to light the excesses of major banks and I would never defend Bank of America or any other national investment bank. I truly believe credit unions are not only a better option; they are the only cooperative option if you want your money to stay and be invested in your local community. I do have to give Bank of America credit because they didn't pull any punches in their announcement. It was clear from my perspective as an industry professional that they were using their size and national reach to highlight how poorly designed the Durbin amendment was. They wanted to show that this law was an ill conceived interference in a working free market system. Of course, their use of the power to make this statement is just why the "Occupy" movement is making a statement in communities around the country.

Their Durbin amendment's desired intent was to take all of the excess profit out of the system and create savings for consumers. Contrary to the rhetoric, there is no super profit for financial institutions in offering debit cards. If credit unions and community banks became subject to this new rule and we lost the income that the largest banks have lost we would lose almost $40 per year per card. Those are not funny numbers it is reality. With system fees, fraud losses, staffing costs, etc. debit cards are not a profit center for our credit union.

The difference between your credit union and Bank of America is that we would have worked to find ways to reduce expenses or create additional income to continue to provide debit card services at no or limited cost. We would have involved you in helping us make the tough choices on how to offset the loss from this irrational new legislation. The most ludicrous part of this new regulation is that the merchants were not required to return the savings to consumers that they realized from the change in the law. So, in the end this uninformed meddling in the free market system has simply resulted in greater cost to the consumer.

From a merchant's perspective they are simply acting consistent within the rules as they are written. However, these new rules effectively change the way community bank and credit union debit cards are perceived by merchants. It costs a merchant more when a community bank or credit union member makes a purchase. We have already heard anecdotal stories of merchants either denying or discouraging purchases using a community bank or credit union debit card.

I need to know if you experience this as soon as it happens. We have been advised that these behaviors will be dealt with swiftly and I want to test these assurances. We should all use this example as a valuable lesson that we must be involved in the process and work to understand the reality behind the unrealistic promises of regulation that is being proposed for the supposed consumer benefits. Finally, I have to end this piece with full disclosure that Bank of America's mistakes are benefitting us greatly. For the first time many consumers are taking a hard look at credit unions and realizing the value that we bring as an honest local solution for all of their financial needs. If more folks consider credit unions because of this then we all win, but a victory at someone else’s expense is always a hollow victory. Let's use this example as why we all need to demand responsible regulation that considers the unintended consequences for all parties.

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