WASHINGTON -- The U.S. House of Representatives on Tuesday passed the Credit Cardholders' Bill of Rights Act (H.R. 5244), legislation to rein in unfair and deceptive credit-card company practices, on a vote of 312 to 112, said the Merchants Payments Coalition (MPC), a group of retailers, including convenience stores and gas stations, fighting against unfair credit-card fees.
Representative Peter Welch (D-Vt.), who supports credit-card company reforms, urged subsequent legislative action on credit-card interchange fees, one anticompetitive card company practice not being specifically addressed [image-nocss] Tuesday. (Click here to view the MPC's information webpage on how interchange fees affect gas stations.)
One of the bill's purposes is to stop credit-card companies from continuing to exercise harmful and anti-free-market practices that severely inhibit small-business owners ability to grow their business, hamstringing the U.S. economy, added the National Small Business Association (NSBA).
Credit cards are critical to small businesses. Many small businesses lack the assets necessary for traditional bank loans and turn to credit cards as a vital source of capital, said the group. In a nationwide NSBA survey, 44% of small-business owners identified credit cards as a source of financing they had used in the previous 12 months—more than any other source of financing, including business earnings. Despite small-business owners' increasing reliance—in 1993, only 16% relied on credit cards—nearly two-thirds reported in August that the terms of their credit cards are worsening.
"Imagine if I, as a small-business owner, was allowed to routinely change my terms of engagement with my clients at any time for any reason—it's just unthinkable," said Larry Nannis, NSBA vice chair for advocacy and a small-business owner from Needham, Mass. "Yet, credit-card companies do this every day. All we are asking for is basic fairness—that credit-card companies be held to the same standards as any other business."
H.R. 5244 will codify the most significant regulatory changes recently proposed by the Federal Reserve Board. It is crucial that these proposed changes be codified to ensure their enactment and applicability in the future. The idea that Congress need not delve into this issue because the Fed already has is shortsighted, said the NSBA. The Fed easily could weaken its proposed rule before enacting it or in the future, it added.
As the federal government calls for a $700 billion financial bailout plan for some of the largest U.S. corporations, there are countless small-business owners struggling with an inability to garner financing, skyrocketing energy costs and business loans out-valuing their home equity, the group said. Yet, small business is still charged with creating jobs—having created 93.5% of all net new jobs since 1989—and driving the U.S. economy out of the current slump, said the NSBA.
"The overwhelming majority of small-business owners are feeling the credit crunch, and this bill offers a tangible way to ease their pain," said Todd O. McCracken, NSBA president. "I certainly hope all the talk we've heard during this election cycle about the importance of small business isn't just lip service."
In support of merchants, meanwhile, Welch made the following floor statement: "This bill is the beginning of important reforms in credit cards—the beginning of increased protection for consumers of credit-card companies. The other side of the coin, which we're not taking up today but will hopefully get to, is for merchants who pay fees to credit-card companies for every single credit-card transaction—the so-called interchange fees. Mr. Speaker, in the United States, our credit-card interchange fees are the highest, the highest, in the entire world accounting for as much as 2% of the cost of every credit-card transaction, in some cases a good deal more. These bloated interchange fees are passed on to the consumer. The average American family in fact pays an extra $300 a year in items they purchase as a result of credit cards."
He added, "I have introduced legislation, H.R. 6248, the Credit Card Interchange Fees Act, which would require credit-card companies to disclose their interchange rates, terms and conditions to consumers, businesses, and the public. In addition, the bill would empower the Federal Trade Commission to review these rates and rules and prohibit any practices that violate consumer-protection or anti-competitive laws. Chairman John Conyers also has important legislation—the Credit Card Fair Fee Act—that has been passed out of the Judiciary Committee and would give merchants a seat at the negotiating table to determine the fees assessed for every sale made by credit card."
He concluded, "In the next Congress, I look forward to continuing to work with my colleagues on the Financial Services Committee and the Judiciary Committee to pass legislation into law that protects both the consumer and the merchant from credit-card companies."
Welch is the sponsor of H.R. 6248, the Credit Card Interchange Fees Act of 2008. He is also an original co-sponsor of H.R. 5546, the Credit Card Fair Fee Act.
The MPC is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, online merchants and other businesses fighting against unfair credit-card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.
The NSBA reaches more than 150,000 small businesses, it said.
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