For each consumer payment card purchase--at the mall, at the grocery store, at a gas station or on the Internet--the merchant is charged a fee. As much as 90% of this fee is the interchange fee, which is the [image-nocss] payment made by the merchant's bank to the consumer's bank. These fees are ultimately passed on to all consumers in the form of higher prices for goods and services. The fee percentage is set by the credit-card companies, generally Visa or MasterCard, and averages 1.75% of the total purchase, said Conyers.
In 2008, interchange fees from these two companies totaled approximately $48 billion, an increase of 189% since 2001. Visa and MasterCard control more than 73% of the volume of transactions on general purpose cards in the United States and approximately 90% of the cards issued. Merchants are forced to deal within this system because it is not a practical option to refuse to accept Visa or MasterCard from their customers. They are presented with "take-it-or-leave-it options," said Conyers, and they are not part of the process by which the fees are set.
"It is time to level the playing field for merchants and consumers," said Conyers. "This legislation will give merchants a seat at the table in the determination of these fees. It is not an attempt at regulating the industry and does not mandate any particular outcome. This bill simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees."
Added Shuster: "Many of the merchants who get hit by interchange fees are small businesses that can't absorb the charges as easily as their larger competitors. For far too long, merchants were locked out of the decision making process between banks and that needs to change. This legislation will give merchants a much needed seat at the table to negotiate a better bargain on credit-card fees and charges that will help businesses and consumers alike save money."
The National Association of Convenience Stores (NACS) applauded the re-introduction of the legislation. "We are delighted that Congress is taking a closer look at these outrageous fees on the heels of its reform of the credit card industry's abusive lending practices. Now it's time to address the rest of the credit-card industry's abusive practices," said NACS Chairman Sonja Hubbard, CEO of Texarkana, Texas-based E-Z Mart Stores.
"Right now, swipe fees are fixed by the banks, hidden from the public and forced on retailers in a 'take-it-or-leave-it' offer. The Credit Card Fair Fee Act would allow retailers and the card associations to negotiate on equal footing, and we applaud this bipartisan effort to make it happen," she said.
"It is simply outrageous that the banking industry--which received hundreds of billions of dollars in taxpayer-funded bailout money--continues to spread fear and misinformation in their lobbying efforts. The bottom line is that unless Congress fully addresses how credit-card swipe fees are determined, and why they are set in secret and hidden from consumers, the banking industry will have free rein to establish higher rates and create new hidden fees that continue to punish Americans," said Hubbard.
The Petroleum Marketers Association of America (PMAA) said the legislation is similar to what Conyers introduced last year with then-Representative Chris Cannon (R-Colo.) to curb excessive interchange fees.
It would allow merchants to negotiate interchange fees with Visa and MasterCard and the issuing banks as a group. Visa and MasterCard would also be permitted to negotiate separately with individual merchants or groups of merchants and those agreements would be made public and filed with the Attorney General. If the parties fail to reach a negotiated agreement, the AG would monitor the process and recommend to the House and Senate Judiciary Committees how Congress should respond to the conduct of the negotiations.
PMAA supported the Credit Card Fair Fee Act of 2008, which received bipartisan approval in the House Judiciary Committee last year with nine Democrats and nine Republicans joining Conyers in passing the bill 19 to 16. PMAA also supports the Credit Card Fee Act of 2009 as well as the Credit Card Interchange Fees Act introduced several weeks ago by Rep. Peter Welch (D-Vt.) and Shuster. The Welch-Shuster bill would eliminate anticompetitive contract rules, such as the Honor All Cards rule that Visa and MasterCard impose on the merchants who accept their cards and require disclosure of interchange fees to the Federal Trade Commission (FTC), Federal Reserve and consumers.
PMAA and retailer group the Merchants Payment Coalition (MPC) continue to urge legislators to pass language that will give retailer groups the opportunity to negotiate interchange fees in a transparent environment. PMAA believes these negotiations will put downward pressure on interchange fees and force credit card companies to provide justification for the rates charged.
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