DCUC's Stverak Warns Massachusetts Interchange Proposal Could Create 'State-Specific Rewrite' Of Payments System
By CU Today Staff —
BOSTON— Defense Credit Union Council Chief Advocacy Officer Jason Stverak told Massachusetts lawmakers Monday that interchange legislation being considered by the state could have consequences far beyond merchant fees, warning it risks creating a patchwork of payment rules that would complicate operations for credit unions and consumers alike.
Testifying before the Massachusetts Special Legislative Commission studying the future of payments and credit card transactions, Stverak said interchange revenue is essential to the services many credit unions provide, particularly those serving military communities.
"For defense credit unions, interchange revenue is not excess profit," Stverak told lawmakers. "It helps fund fraud prevention, cybersecurity, rewards, secure digital banking, financial counseling, low- or no-fee products, deployment relief and, in many cases, on-base or military-community access points that exist because members need them, not because they are highly profitable."
Jason Stverak testifies Monday.
Stverak argued that proposals modeled after laws adopted or considered in states such as Illinois, Pennsylvania, New York, New Jersey and Colorado go beyond pricing issues and instead alter how payment systems operate. Illinois' law, he noted, requires tax and gratuity data during authorization or settlement, establishes documentation and refund requirements, prohibits certain workarounds and imposes penalties for non-compliance.
"That is not a narrow pricing issue," Stverak said. "It is a state-specific rewrite of payment operations."
Stverak said such state-by-state approaches are particularly problematic for military families, who frequently relocate across state lines and rely on payment networks that function consistently nationwide.
"A patchwork regime creates uncertainty for merchants, acquirers, issuers, processors and members at the same time," he testified. "It turns ordinary card acceptance into a documentation, reconciliation and refund exercise."
Stverak also pointed lawmakers to the recent action by NCUA clarifying that federal credit unions may charge non-interest fees, including interchange fees, and that conflicting state limits are preempted for federally chartered institutions. As a result, he warned, state-chartered credit unions could face a competitive disadvantage.
"If payments rules become materially harsher for state charters than for federal charters, it will create strong pressure for state-chartered institutions to evaluate federal conversion simply to preserve parity in card operations, vendor contracting and member service," Stverak said. "That would weaken the state charter over time and undercut a system built on meaningful charter choice."
During questioning, Stverak was asked by William Rennie, SVP of the Retailers Association of Massachusetts whether DCUC has a position on merchant surcharging. While noting the organization does not have an official position, he said many retailers have adopted the practice as a way to pass interchange costs directly to consumers.
"If you do want to use a credit card or a debit card, here's the fee to use it," Stverak said, adding that customers are often given the option to pay with cash instead.
Also testifying on behalf of credit unions was Peter Rice, president and CEO of Hanscom Federal Credit Union, who argued that interchange revenue helps support fraud protection and consumer confidence in the payments system.
Rice cited FBI data showing Massachusetts residents lost nearly $339 million to cybercrime in 2024 and said financial institutions often bear the responsibility of making consumers whole when fraud occurs. He also pointed to studies following the Durbin Amendment, arguing that promised consumer savings failed to materialize while checking account fees and minimum balance requirements increased.
Originally reported by CU Today.