Dan Fisher

With over 35 years in the financial industry, Dan M. Fisher has proven himself as a leader in the financial industry holding roles as the former director of the Federal Reserve Bank of Minneapolis and former Chairman of the ABA Payment Committee.

Recently Dan M. Fisher has been featured on the CUToday website regarding interchange and alarming trends The Copper River Group has observed in the industry. 

Although this article specifically mentions credit unions, this same phenomenon is happening to community banks. Banks and credit unions alike need to be aware of the out of control practices network vendors are exercising behind the scenes. Millions of interchange dollars annually are lost by community financial institutions. 

Read the article below to find out more! Or visit CUToday to read the original version via this link.

Nothing Short of Theft: It’s Time for Action on Interchange

Vendors are scrambling to grab market share, and what The Copper River Group has observed by some of these vendors is becoming alarming. 

Community financial institutions (exempt iInstitutions as defined by Regulation II), such as credit unions, are constantly asking why interchange income is decreasing even though debit card volume is increasing. Frustrated, CUs reach out to their card payment networks, which then deny responsibility and blame the phenomenon on Regulation II. 

This leaves CUs feeling like there’s nothing they can do, but this is not true, especially when it comes to Card Present PINless Debit Transactions. It is deception by the card network. 

Here’s what is true. CUs are now targeted by big box retailers and card payment networks misusing Regulation II. 

Networks now negotiate directly with retailers for special deals while rewriting their operating rules to increase fees and fraud risk to the credit unions. By virtue of these agreements, CU interchange income is reduced, because the transactions are now routed to the merchant networks. 

Out of Control

These practices are out of control. Millions of interchange dollars annually are lost by CUs. At the same time, covered FIs under Regulation II are earning twice as much interchange per average debit card pinned transaction–the exact opposite of what Durbin intended to achieve. These rule changes are nothing short of theft.

Card-Present Point of Sale (PINLess Debit Transactions)

Note: Interchange is paid two ways. For Card Present Pinned and Card Present PINLess transactions, the fee is defined by the type of transaction. For charge type transactions (signature debit), it is based on the percentage of the amount of purchase. This article will only discuss Card Present Pinned and Card Present PINLess transactions. 

Card Not Present PINless Debit transactions are why interchange income is plummeting. These transactions eliminate the requirement to enter in a PIN at POS even when the card is present. This was never the intention of Durbin or Regulation II, nor is it a requirement. 

Furthermore, neither regulation intended on increasing debit card fraud that can’t be charged back to the merchant instead landing on the credit union’s shoulders.  

Networks created this type of transaction to provide an inexpensive option to merchants. Your network changes the rules to benefit the merchant because the merchant now chooses your network. The networks increase your fees, reduce the merchants’ fees, and force your institution to guarantee the transaction even if it is fraudulent.

When a credit union questions the network about this, more often than not the vendor states it is a requirement to comply with Regulation II. Again, this is not true. Furthermore, some card payment networks even include a Regulation II compliance reference in their processing agreements, further coercing the CU to stop questioning.

If all the facts were publicly published, issuers would not agree to Card Present PINLess debit transactions and vendors requiring a CU to comply with these types of network operating rules would be refused or avoided by CUs. 

Credit unions are being exploited by vendors they are supposed to trust.

Section 920 and Regulation II

To comply with the rule, an issuer must enable their cards and other payment codes to process transactions over at least two unaffiliated card payment networks on each debit card. 

It is all about choice. Card Present PINLess debit has nothing to do with it.


Some card payment networks have expanded the network operating rules definition of Card Present PINLess debit by raising the upper limit of PINLess POS debit transactions from $50 to $100. This is why interchange has dropped.


Card payment networks have also added linkage to the network operating rules. This prevents institutions from managing their debit card portfolios in a cost-effective manner. 

Example: Assume a credit union does not like the surcharge-free network their current card payment network offers. The CU decides it wants to join a separate network. After notifying the current network about joining, the network informs the CU of the Network Operating Rule stating if they join one surcharge network, they must join the network they did not want to. 

This can be construed as Restraint of Trade because it increases costs, reduces profitability and limits what the CU can do. 


Tell the vendors that enough is enough. The only thing that is going to gain their attention is if credit unions start walking away to a competitor that is issuer friendly.

Next, credit unions are going to need to create an advocacy group. Credit unions at one time had profitable EFT debit card portfolios. That is not necessarily the case today. 

Our suggestion is you call it out! Call the NCUA, file complaints with the FTC and DOJ, then send a copy to the Federal Reserve Board of Governors and ask them to take a hard look at these practices.

Level the Playing Field

Discover, Mastercard, and VISA all publicly publish their rules. All card payment networks should publicly publish their network operating rules and charge-back rules. 

If the card payment networks are doing nothing wrong or deceptive, then they should have no reason to withhold this information. 


Credit unions have a right to run their debit card portfolios in the best interests of their members, not the vendor. CUs should not be forced to allow the PIN to be deliberately circumvented by the vendor for the purpose of benefiting the network and the merchants they serve. 

Credit unions should have the right to opt-out of a product that is not in its best interest, and/or leave the vendor without penalty. 

Every CU is complaining about interchange income, but waiting for somebody else to do something about it. Obviously, some vendors enjoy that fact that nothing is being done.

get a free EFT review for interchange income

Dan Fisher

With over 35 years in the financial industry, Dan M. Fisher has proven himself as a leader in the financial industry holding roles as the former director of the Federal Reserve Bank of Minneapolis and former Chairman of the ABA Payment Committee.

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