Representatives of the Iowa banks and credit unions have been in Washington lobbying against a Senate amendment in the financial reform bill they say would lead to bigger fees for credit union members. Iowa Credit Union League vice president of government affairs, Justin Hupfer, says the amendment would allow the federal reserve to set the rate for what’s called an interchange fee on debit cards. Hupfer says that fee is charged to businesses when someone uses a credit or debit card.

Hupfer says the fee goes back to the institution that issued the card and helps pay for the cost of the payment network, the fraud risk associated with the cards as well as other things such as call centers and card reissuance. Hupfer says right now the fee is roughly 1.6% of the transaction.

He says the senate amendment would make the rate based on actual costs and it would come down and wouldn’t include the cost of protecting against fraud, which he says is a significant cost for debit card programs. Hupfer says big businesses are in favor of lowering the interchange fee, but he says doing so would lead to more fees for consumers.

“The impact of that reduction in revenue is going to have to be made up by credit union members in the form of things like annual fees to use your debit card, and things like free checking will likely go away,” Hupfer says.

Hupfer says merchants benefit from the debt cards because they are paid immediately, payment is guaranteed, they don’t have to deal with cash or wait for a check to clear. While he says financial institutions bear the expense of providing that benefit to merchants. Hupfer says it’s unlikely merchants would reduce the price of their goods if the interchange fee was lowered.