ICBA News, sponsored by CNA—Fed Announces No Changes in Interchange Fee Cap

Interchange
Fed Announces No Changes in Interchange Fee Cap
The Federal Reserve Board said it does not plan to propose revisions to the interchange fee cap after releasing results from its 2012 survey of payment card networks and covered issuers (banks and credit unions with assets greater than $10 billion) regarding interchange fees, issuer costs, and issuer and merchant fraud losses. Regulation II bars covered issuers from charging interchange fees that exceed 21 cents plus 5 basis points multiplied by the value of the transaction, plus a 1-cent fraud-prevention adjustment.

According to the study, based on calendar year 2011 information, 67 percent of covered issuers had average authorizing, clearing and settling (ACS) costs below 21 cents. These institutions processed almost all (99.7 percent) of all reported covered transactions.

The median issuer had ACS costs of 11 cents, while the issuer at the 75th percentile had an average cost of 36 cents. Issuers with the highest debit card transaction volume generally had the lowest costs per transaction, as reflected in an overall average of 5 cents per transaction. Conversely, issuers with the smallest debit card programs generally had the highest ACS costs per transaction.

The Fed estimated debit-card fraud losses to all parties to be $1.38 billion in 2011, with signature debit losses of $1.13 billion and PIN debit transaction losses of $204 million. These losses were absorbed by issuers (60 percent), merchants (38 percent), and cardholders (2 percent). Issuers incurred 96 percent of PIN debit fraud losses and 54 percent of signature debit fraud losses. Merchants absorbed the majority of card-not-present losses and issuers absorbed most of the counterfeit card fraud losses.

ICBA has vigorously opposed any government pricing fixing of interchange fees, arguing that consumers and, eventually community banks, would be harmed by government intervention in the highly competitive, free-market payments industry.

Payments
Fed Announces Robust Changes to Same-Day ACH Service
The Federal Reserve Retail Payments Office recently announced an expansion of its opt-in Same-Day ACH Service. Effective April 1, the service will:

Encompass all SEC Codes except international transactions (IAT) and truncation entries (TRC and TRX)
Allow credits and debits
Allow consumer and business transaction
Incorporate no dollar limits (except those already in place for check conversion transaction)

Participation in the service will be on an opt-in basis, and there will be no changes to pricing or deadlines. New participants wishing to opt-in to this service will need to complete participation agreements by March 21 for service commencing on April 1. Existing same-day participants will operate under existing participation agreements.

ICBA commends the Fed for advancing faster ACH payments, which helps level the playing field between community banks and their larger competitors. ICBA strongly encourages community banks to consider opting in to this service and to weigh the implementation and staffing costs with the long-term strategic benefits of same-day payments.

ICBA NewsWatch Today is sponsored by CNA:
ICBA Member Milestones, brought to you by CNA, recognizes community bank anniversaries and milestones in the March issue of Independent Banker magazine. CNA understands it takes more than a strong balance sheet to run a successful bank. It takes commitment to the community, dedication to service and flexibility to meet the needs of clients. For more than 100 years, CNA's professionals have worked to build strong relationships and solid business insurance solutions that meet the needs of their clients. For more information on CNA’s programs, visit www.cna.com/communitybanks.

Advocacy
Plan for Prosperity a Top Washington Policy Summit Priority
With registration now open for the 2013 ICBA Washington Policy Summit, participating community bankers will have the opportunity to advocate ICBA’s newly launched Plan for Prosperity. The flexible advocacy plan calls on policymakers to enact regulatory-relief provisions designed to ease the burden on community banks to help them serve their communities.

At the advocacy conference, scheduled for April 24-25 in Washington, D.C., community bankers will engage their members of Congress and regulators on important policy issues and hear firsthand from the nation’s top banking and financial leaders. Advancing the Plan for Prosperity, which includes provisions to exempt community banks from mortgage-lending reforms, improve bank exam accountability, and offer relief from auditing expenses, will be a top priority.

Provisions of the plan already introduced in the 113th Congress would exempt community banks from proposed municipal advisor regulations, offer relief from redundant privacy notice requirements, reform the Consumer Financial Protection Bureau’s structure and apply new Securities and Exchange Commission deregistration thresholds to thrifts.

More information on the summit, including how to register and what’s on the schedule, is available on 2013 ICBA Washington Policy Summit website. Register for the Summit. Learn More About the Plan.

Marketing
ICBA Distributing “I Luv My Community Bank” Testimonials
Every week through April 12, ICBA is distributing to participating community banks “I Luv My Community Bank” testimonials from customers. Submissions for the campaign, which is designed to promote the importance of community banks, are being collected via the campaign’s unique interactive website, the Facebook app, and on Twitter (using the hashtag #ILuvMyCB).

Community banks that have signed up for the campaign but have not yet received testimonials should continue promoting the campaign in their communities. Additionally, be sure to direct consumers and small businesses to see contest rules so that they can be eligible as one of the top 10 finalists.

The campaign is designed to promote the importance of community banks and will complement Community Bank Month in April and the nationally recognized Go Local initiative. Sign Up Today!

Regulation
ICBA’s Fine: Regulators Should, First, Do No Harm
The stream of regulations from Washington is not only seemingly endless, it is often contradictory, ICBA President and CEO Cam Fine wrote in a message to community bankers. Community banks are under pressure to obey safety-and-soundness guidelines that restrict access to credit and, at the same time, to reach out to underserved communities, Fine wrote. Read the Message from Fine.

Regulation
FinCEN Proposes Foreign Bank Report Changes
The Financial Crimes Enforcement Network proposed changes to the Foreign Bank and Financial Accounts to standardize it with other electronically filed Bank Secrecy Act reports and to add the capability for a third-party preparer to file the report. The agency also proposed adding an item to record the type of taxpayer identification number, among other minor changes. Written comments are due by May 6.

Economy
Service-Sector Economy Improves in February
Services-sector economic activity rose in February, according to the Institute for Supply Management. ISM’s Non-Manufacturing Index rose 0.8 percentage points from January to the highest level since February 2012. The business-activity, new-orders and price indexes rose, while the employment index declined but remained above growth-neutral.

Poll
This Week’s Quick Poll
Take this week’s Quick Poll on community bank advocacy, and view results from the previous poll on K-12 in-school bank branches. View the Archive.

Education
ICBA Auditing Institutes On Tap
ICBA is hosting a two-week Auditing Institute to provide community bankers with tools and step-by-step procedures to establish and maintain an effective internal auditing framework. The comprehensive classroom seminars, which are broken into two weeks of classes, are scheduled for April 29-May 3 and May 6-10 in Kansas City, May 12-17 and 19-24 in San Francisco, and Sept. 9-13 and 16-20 in Minneapolis. Register for Week One. Register for Week Two.