Banks, Credit Unions Oppose Wisconsin’s “Inconvenient” Swap Bill | Credit Union Journal

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Credit unions and banks don’t often agree, but the two industries have come together in Wisconsin to oppose legislation they say will hurt the state’s financial institutions.

At stake is pending legislation that would ban trading on the sales tax portion of electronic payments. This would force card issuers, who typically only see the full price of the transaction, to implement new systems to separate or itemize each taxable sale.

A hearing on the proposal, known as Assembly Bill 587, was held on October 21 before the Wisconsin Assembly Committee on Financial Institutions. The bill remains in committee and is not currently put to a vote.

Opponents say the proposal would hurt consumers and small businesses as it would result in additional administrative costs and burdens for retailers, which would be passed on in the form of higher prices.

This group includes the two largest trade associations of credit unions and banks and the Electronics Payments Coalition. In a letter to the Wisconsin Assembly Committee on Financial Institutions, these groups and others said retailers would be required to create and implement new payment systems and operational mechanisms to ensure compliance. These tasks would be both expensive and cumbersome, according to the groups.

It will be “difficult to develop unique trading rules for certain types of transactions for the state of Wisconsin alone.” It will be more expensive for smaller financial institutions to implement and will disproportionately harm those institutions, ”said Paul Hoffman, President and CEO of Monona Bank. .

When a retailer makes a sale using a customer’s electronic payment card, the system that processes the transaction recognizes only the final purchase amount on which the merchant’s rebate fee is based. The system does not distinguish between the price of the product or service and the price of the sales tax imposed, according to the letter.

The legislation would also make Wisconsin an “island” in a national payments system.

“The unachievable nature of the proposal is underscored by the fact that nearly 30 similar proposals to ban trading on the sales tax portion of electronic transactions were reviewed between 2006 and 2021 and none came out of the benchmark committee. original “, indicates the letter. States.

But supporters of the bill, including State Senator Dan Feyen, a Republican from District 18 of Wisconsin, said the sweeping fee was costing state retailers $ 36.74 million in 2019 and $ 50. , $ 79 million in 2020.

“When we talk to local businesses, we’ve heard that while they are happy to pay transaction fees for the convenience and convenience of accepting credit cards, they don’t like paying fees on tax money that doesn’t belong to them, ”Feyen said.

But the association has no estimate of how much the legislation could cost the state’s credit unions, according to Brett Thompson, president and CEO of the Wisconsin Credit Union League.

“Paying the interchange fee on only part of the total transaction, as the bill proposes, is impractical and results in disproportionate compensation for the protections and guaranteed payment provided by the credit union, for the total amount of the transaction, ”said Thompson.

Paul Hoffman, chairman and CEO of Monona Bank, a $ 1.1 billion asset in Monona, Wis., Said interchange revenue had become even more important as a way to fund his anti -fraud. The bank’s systems provide peace of mind to consumers and businesses that their payments will be processed securely.

“It will also be difficult to develop unique trading rules for certain types of transactions just for the state of Wisconsin,” Hoffman said. “It will cost more to implement for small financial institutions and harm these institutions disproportionately and favor the larger players in the national payment system. “

The legislative proposal to separate the sales tax portion of a transaction from the purchase price has been proposed over 40 times in states across the country over the past 16 years without success because it is impractical in the ecosystem. payment systems today and harm consumers and institutions, said Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association.

Interchange fees are used to compensate banks and credit unions that issue credit and debit cards for the many services they provide to retailers and consumers, including ensuring immediate payment for goods or services purchased and protection against fraud.

Removing some of these fees directly harms financial institutions, forcing them to bear more of the financial burden to ensure a smoothly functioning electronic payment ecosystem for everyone involved, Oswald Poels said.

The idea discussed at the hearing in Wisconsin is a technically unfeasible proposition that would disproportionately harm consumers and small businesses, according to Brad Thaler, vice president of legislative affairs for the National Association of Federally-Insured Credit Unions.

If the proposal were to pass, it would create new burdens on small businesses and confuse consumers, as they could find a system in which sales taxes would have to be paid in cash or by check in order to implement this policy, a Thaler said.

“Thirty states have already rejected this idea in the past 15 years, and we hope Wisconsin will do 31 by not acting on this proposal. NAFCU will continue to oppose reckless government intervention in the payments ecosystem to ensure that the payment system continues to work for credit unions, ”he said.

But the National Association of Convenience Stores, which supports the bill, said sweeping fees that merchants pay in the United States today are higher than in any other industrialized country in the world.

The group’s general counsel, Doug Kantor, said the bill just made sense. “It treats traders fairly and prevents them from losing money due to their service to the state,” Kantor wrote in a letter to the State Assembly’s Committee on Financial Institutions.

The interchange fees assessed by card networks have remained largely unchanged over the past 10 years, so the burden on retailers is very low per transaction, Oswald Poels said.

“What has changed is the growth in transaction volume, but this incremental growth in cost to retailers is simply the cost of doing business when accepting a card as a method of payment,” a- she declared.


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