Teachers, Teachers’ Credit Unions and Interchange

The National Education Association, a large teacher’s union, has written a letter (PDF) supporting postponing if not killing the Durbin amendment on interchange reform (h/t Yglesias).

The NEA should mention the extent to which credit unions run for teachers and other education workers are or are not the motivating factor behind this letter. At the very least, an acknowledgement and maybe some summary statistics.

Because if you check out the comment letters to the Fed regarding the Interchange amendment, you’ll see letters with similar arguments from places like The Education Credit Union, Greg Bynum  (248 KB PDF)Brazos Valley Schools Credit Union, Joseph E. Simmons  (87 KB PDF)Desert Schools Federal Credit Union, Susan Frank  (470 KB PDF)Schools First Federal Credit Union, Erin Mendez  (544 KB PDF), etc.

So this argument should be viewed in light of the credit union argument. Firms with less than $10 billion in assets will not be covered by the interchange amendment, though credit unions don’t believe this will be the case in practice. Felix Salmon took a look at the arguments for credit unions last June and found them wanting, Adam Levitin did an overview of interchange and Credit Unions and the Durbin amendment in December 2010 and found that while it is complicated, competition from the market is likely to follow-through on two-tier pricing, benefitting credit unions.

There’s a lot of references to identity theft, protection from fraud, etc. in these letters. It’s worth noting that the current system incentivizes the riskiest payment system we can have by penalizing the use of a much safer pin-network, and blocking advances in fraud reform in terms of new technologies.

Update: Adam Levitin points out that if you search a list of Credit Unions here there are a large number with Teacher, Education, School, etc.  It’s tough to imagine that this isn’t about the credit union’s point of view.

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