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National Restaurant Association - Survey: Debit reform has little impact on small bank, credit union revenues

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Survey: Debit reform has little impact on small bank, credit union revenues

Debit reform enacted last year hasn't significantly affected revenues at small banks or credit unions, a new survey confirmed.

The survey, conducted by the Credit Union National Association, reported data mirroring the findings of three federal agencies: the Federal Reserve, the General Accounting Office and the Federal Trade Commission, which found that reduced swipe fees had limited financial impact on small banks and credit unions.

"Credit unions have confirmed what the FTC, GAO and Federal Reserve have found: small bank exemption from debit reform has worked," said Scott DeFife, executive vice president of policy and government affairs for the National Restaurant Association, which has fought long and hard to reduce swipe fees for small business owners, such as restaurateurs. "This news demonstrates that debit reform has been good for consumers, Main Street businesses and smaller banks as well."

The competitive edge to small banks and credit unions as a result of the reforms also was affirmed by Lee Wetherington, director of strategic insight for ProfitStars, a software, solution, and technology consultant, in an American Banker article. In "Durbin Exemption Proves a Real Edge for Small Banks", he said, "We are officially more than one year into Debit 2.0, the post-Durbin era brought to us by way of the Federal Reserve's Regulation II, and smaller debit-card issuers' fee income remains largely intact."

Debit reform, which was legislated in the Durbin Amendment, limited big banks' price fixing of fees charged to merchants for debit card transactions. All but the largest banks, with $10 billion or more in assets, were exempted from the law's limits.

According to the Merchants Payments Coalition, a group of merchants concerned about rising swipe fees and lack of transparency and competition in the credit-card market, has said that credit-card companies and big banks continue to circulate inaccurate and misleading information to consumers about the impact on smaller banks as a way to kill further reforms on credit-card swipe fees, which they say have more than tripled since 2004 and currently generate more than $50 billion in annual revenue for banks.

The credit-union study, however, found that small banks and credit unions continue to prosper. In fact, it noted that credit union revenue from debit cards not requiring a PIN number, which accounts for 61 percent of all debit transactions, have "remained steady [while] volume... grew."

The survey further indicated that revenue from debit cards requiring a PIN number dropped just 6 percent, and even with the drop, the revenue is more than what was 10 years ago when the fee was between 5 cents and 10 cents per transaction.

Swipe fees are the second highest expense for merchants and are calculated into consumer prices, the MPC said.

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