The Credit Card Fair Fee Act (H.R. 5546), introduced by Rep. Chris Cannon (R-Utah) and Rep. John Conyers (D-Mich.), would require Visa and Mastercard to negotiate fees with retailers and create a three-judge panel to resolve disputes.Latest Post | Last 10 Posts | Archives
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The Antitrust Task Force of the House Judiciary Committee held hearings this week on legislation that sheds a little light on the interchange and transaction fees merchants pay to accept credit cards — and the underlying cost of our national obsession with plastic.
The Credit Card Fair Fee Act (H.R. 5546), introduced by Rep. Chris Cannon (R-Utah) and Rep. John Conyers (D-Mich.), would require Visa and Mastercard to negotiate fees with retailers and create a three-judge panel to resolve disputes.
Tom Robinson, a gas station operator who testified for the National Association of Convenience Stores, said 8 cents of every gasoline dollar goes to credit card fees that are set collectively by the credit card companies and large banks. Convenience stores paid $7.6 billion in card fees last year, Robinson said, up $1 billion from 2006, and had little or no negotiating power with their banks and the credit-card brands.
Joshua Floum, Visa’s general counsel, argued the bill would impose “price controls” on the credit card industry. Retailers “acknowledge the value that electronic payments bring to them, but they want it for less money,” Floum said.
The National Retail Federation is championing HR 5546 as a consumer-protection bill, saying that the average household paid $427 last year in interchange fees most shoppers don’t even know about. Evan Schuman, editor of StoreFrontBackTalk.com, points out on RetailWire that the $427 figure comes from very fuzzy math — the NRF divided the $48 billion retailers paid in 2007 interchange fees among 112 million U.S. households.
He adds:
There’s also an underlying assumption that if the fee were reduced, prices would be reduced by that much. What are the odds of that happening versus retailers adding those pennies to their razor-thin bottom line? Consumers are already paying the same price for cash or check or debit card versus payment card (and, for that matter, the same price for Visa versus Amex). So the logic that a rate reduction would somehow flow to consumers is flawed.
Retail lobbyists aren’t relying on that logic, instead pointing out that retailers — especially small retailers — have been caught between the rising cost of credit processing and shoppers’ eagerness to use credit cards for routine purchases like groceries and gas.
They also blame greed. Says the NRF: “A 2006 report by Chicago’s Diamond Management and Technology Consultants Inc. found that only 13 percent of the interchange fee is needed for actual transaction processing costs, with most of the rest going to the cost of card issuers’ rewards programs and profits.” In other words, merchants pick up (and pass along) the cost of “free” airline miles, cash rebates and Bruce Springsteen tickets that card issuers have promoted endlessly to consumers.
Retailers have filed more than 60 suits against Visa and Mastercard, which handle more than 80 percent of plastic-card transactions. And the task force that heard testimony — Antitrust — tells you all you need to know about where the retail industry is headed with this.
Photo by Flickr user SqueakyMarmot, CC 2.0
posted by Lisa Everitt
May 16, 2008 @ 3:39 pm
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