Last week, credit unions gathered in Washington, D.C., for America’s Credit Unions Governmental Affairs Conference (GAC) 2024, the largest credit union advocacy event of the year. We spent time together advocating for an environment where credit unions — and their members — thrive.

The week was also active on the legislative front in Washington. Here is a brief update on the latest proposed legislation, including Velera's (formerly PSCU/Co-op Solutions) position on each, along with a few calls to action. As both a credit union-owned cooperative and an integrated fintech solutions provider, Velera is the only large payments organization that is effectively engaged to protect only the interests of credit union issuers.

Proposed Revisions to Reg II Debit Interchange

On March 5, Rep. Blaine Luetkemeyer (R-Mo.) introduced the Secure Payments Act (H.R. 7531), which would potentially stop the Federal Reserve's finalization of its proposed debit interchange rule, Regulation II (Reg II). This bill would require a study to assess the impact of Reg II on consumers’ access to low-cost or free checking accounts, fraud prevention and merchants’ cost of accepting debit cards, as well as the impact on small financial institutions (FIs) and the availability of debit products to low-income communities.

While Reg II is directed at debit issuers with assets over $10 billion, the downstream impact affects everyone. The Federal Reserve seeks to revise and reduce the debit interchange rate cap implemented with the 2010 Dodd Frank/Durbin Amendment and codify an ongoing rate adjustment every two years. However, automatically adjusting the cap bi-annually does not provide for analysis or comment on adjustments and the compressed timeframe, as proposed, results in three adjustments in a narrow window.

The comment period for Reg II has been extended until May 12. Velera is crafting a comment letter and will be providing key content considerations for credit unions to submit their own letters to the Fed.

CFPB Actions on Late Fees

Also on March 5, the Consumer Financial Protection Bureau (CFPB) issued its final rule to adopt a late fee safe harbor threshold of $8 for issuers that, with their affiliates, have one million or more open credit card accounts. While Navy Federal is the only credit union directly impacted, Velera is disappointed with the CFPB’s action to regulate the maximum cap on credit card late fees, as an intervention into the very competitive payments marketplace is unnecessary. We know that the value credit unions deliver to members is overwhelmingly superior to large banks — government regulation is unwarranted.

The attempt to “carve out” impact to card issuers with portfolios less than one million accounts will lead to market confusion – and put pressure on card issuers below the threshold to potentially make market adjustments to programs as well. Credit unions advocate for financial health for all, and the new rule to limit credit card late fees to $8 ironically lowers the barrier to consumer delinquency, resulting in higher debt, lower credit scores and reduced credit access.

The rule goes into effect 60 days after being published in the Federal Registry. As large issuers determine their next steps, many anticipate legal action similar to the steps taken leading to the nationwide injunction against Section 1071 (Small Business reporting).

On March 7, the U.S. Chamber of Commerce and other financial groups filed a lawsuit seeking a preliminary injunction to stop implementation of the CFPB’s credit card late fee rule. America’s Credit Unions supports this lawsuit.

Credit Card Interchange

Senators Josh Hawley (R-MO) and Jack Reed (D-RI) have joined Senators Peter Welch (D-VT) and J.D. Vance (R-OH) in support of the Credit Card Competition Act (CCCA) proposed by Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) that would upend credit card interchange for card issuers.

The CCCA targets issuers with assets over $100 billion to enable at least two credit card networks to be used on their credit cards instead of just one, and at least one of those networks must be a network other than Visa/Mastercard. While the legislation has not yet been reintroduced for voting this session, we are supporting all lobbying efforts to counter adding language to active bills.

Known as the “Big Box Bill,” the CCCA would benefit large retailers at the expense of consumers, small businesses and the majority of U.S. financial institutions. Additionally, the legislation would eliminate funding for credit card rewards programs, weaken cybersecurity protections and increase fraud. We do not see this as a win for credit unions or consumers.

The CFPB and Department of Transportation will host a field hearing on March 20 to discuss airline rewards, while Sen. Durbin has requested a public hearing on April 9 with the CEOs of Visa, Mastercard, American Airlines and United Airlines regarding competition in the credit card market. Noticeably absent from the April 9 invite list are any CEOs of the “big box” retailers.

Looking Ahead

Velera remains engaged in our industry’s efforts to oppose legislation that is harmful to credit unions. We urge all credit unions and your employees and members to take action — use your collective voice to stay engaged in these important initiatives. We will continue to monitor developments and keep you informed of how we can use our collective voice to challenge potentially harmful legislation.