Late last month, the stocks were hurt after Senator Chris Dodd (D-Conn.) said he was working on a bill to modify interchange fees, which credit-card issuers collect when transactions are completed on the cards they have issued.
The House Committee onFinancial [image-nocss] Services, chaired by Representative Barney Frank (D-Mass.), had its first hearing on the interchange legislation Thursday (see related report covering yesterday's hearing in this issue of CSP Daily News). Ahead of the hearing, Susquehanna Financial Group analyst James Friedman suggested that there may have been some change of stance by a representative or other turmoil among the proponents of the fee legislation to account for the share price rise, said the report.
SunTrust Robinson Humphrey analyst Andrew Jeffrey noted the stocks have been down for most of the past 10 days, largely on concerns about interchange overhaul. But he said that investors might be starting to think that such a change is both relatively unlikely this year andif it were to occurnot be as bad for Visa and MasterCard as the market has thought in the last few weeks.
A sampling of the pro-card issuer testimony from the hearing:
David Evans of the University of Chicago Law School, testifying on behalf of Visa, said, "It is very difficult to say in practice that the interchange fee charged by a payment network is too high, too low or just right from the standpoint of public welfare and even more difficult for a regulator to have any confidence that it could establish a better interchange fee. This argues for caution in price regulation of interchange fees. Government regulation is appropriate when it is possible to both identify a market failure and fix that failure without creating unintended consequences. That is not possible with the current economic state of knowledge on interchange fees. H.R. 2382 wisely stays away from specific price regulation."
Mark Caverly, testifying on behalf of the Electronic Payments Coalition (EPC), said, "H.R. 2382 attacks many of the essential characteristics of the payment card system upon which consumers depend every day. This legislation would disenfranchise consumers and increase their costs of debit cards and credit cards. For example...H.R. 2382 would reduce consumer choice for payment options, allow merchants to discriminate against credit unions and other small issuers, and facilitate deceptive (and sometimes illegal) surcharging by merchants."
Anthony Demangone, testifying on behalf of the National Association of Federal Credit Unions (NAFCU), said, "Congress should not interfere with a system that is clearly working, by enabling the government to impose price controls. A government set price will drive up costs for consumers, strangle innovation and dramatically reduce credit union ability to pay for compliance costs. Ultimately, any cap on interchange fees will be passed on from financial institutions to consumers in the form of higher interest rates and lower yields on investment products."
Click hereto view the House Financial Services Committee hearing and read all of the testimony on both sides of the issue.
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