DCUC Warns N.J. Credit-Card Routing Bill Could Carry Costs For Military Families, State-Chartered CUs
By CU Today Staff —
WASHINGTON — The Defense Credit Union Council is warning New Jersey lawmakers that proposed credit-card routing legislation could affect the fraud protection, cybersecurity and other card services relied upon by servicemembers, veterans and military families.
The trade group is also concerned about the bill's potential impact on state-chartered CUs.
In an Oct. 3 letter to Assembly Consumer Affairs Committee Chairman William B. Sampson IV, DCUC raised concerns about A1921, which would prohibit payment systems from limiting credit-card transactions to one network or affiliated networks and restrict limits on merchants’ routing choices.
“Military families rely on financial services that remain dependable through deployments, relocations, and the transition to civilian life,” said Anthony Hernandez, DCUC president and CEO. “Defense credit unions serve those families as member-owned institutions. Our focus is the person who needs a fraudulent charge resolved, access to an account from overseas, or help keeping the household finances on track.”
DCUC said interchange revenue helps credit unions fund fraud prevention, cybersecurity, cardholder assistance and rewards, with earnings at the member-owned, not-for-profit institutions returned to members through lower loan rates, higher savings rates and reduced fees. While A1921 identifies greater competition and lower consumer costs among its objectives, DCUC noted the legislation does not require merchants to pass any processing savings on to consumers.
“Interchange supports the work behind the card—fraud response, secure payments, and assistance when something goes wrong,” said Jason Stverak, DCUC chief advocacy officer. “Our letter connects those operating costs to the services military families use. A merchant’s processing savings and a military household’s savings are not the same calculation. For veteran-owned businesses, payment reliability and acceptance costs also belong in that discussion.”
DCUC also raised concerns about the legislation’s potential impact on the dual-charter credit union system. NCUA adopted a rule in June stating that conflicting state restrictions on federal credit unions’ interchange fees are preempted, but that protection does not automatically extend to state-chartered credit unions. DCUC said a state-chartered credit union forced to absorb processing or compliance costs avoided by a federally chartered competitor could face a competitive disadvantage that, if sustained, could influence charter-conversion decisions.
The trade group said the issue has particular significance in New Jersey because of the state’s large military presence, including Joint Base McGuire-Dix-Lakehurst, Picatinny Arsenal, Naval Weapons Station Earle and Coast Guard facilities. DCUC, which has also weighed in on interchange proposals in Colorado, Pennsylvania and New York, asked that its letter be included in the committee record and offered to meet with lawmakers and federal and state-chartered credit union leaders to discuss the legislation.
Originally reported by CU Today.