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media center The MPC is seeking to educate policy makers, regulators, consumers and the media about the impact of unfair interchange fees on consumers and merchants alike. MPC Press Releases Visa/MasterCard Need to Change Their Business Practices, New Report Suggests Merchants Respond to Visa’s Release of Default Interchange Rates - October 18, 2006 Merchants Say Visa/MasterCard Rate Setting Violates Antitrust Laws - July 19, 2006 Merchants Welcome Senate Investigation into Credit Card Fee Price-Fixing - June 15, 2006 Merchants Respond to MasterCard’s Corporate Spin about Credit Card Interchange Fees - May 22, 2006 Merchants Welcome NY Legislation Addressing Hidden Credit Card Fees - May 9, 2006 Merchants Laud Consolidated Complaint Against Visa and MasterCard - April 25, 2006 Merchants Welcome Fed Conference on Credit Card Fees – May 2, 2005 Interchange in the News Please find below a collection of recent news articles about unfair credit card interchange fees. Interchange Fees in the U.S. What credit costs Merchants Confront Credit Card Companies Credit Card Fees You Didn't Know You Pay Visa, following MasterCard, to disclose more fees Credit card hocus-pocus No credit, No Problem Those hidden fees Credit card fees hurt our state's businesses Credit Card Companies Accused of Antitrust Violations DON GONYEA, host: MasterCard and Visa rake in billions in fees from the nations retailers. Merchants have long complained about the way those fees are determined. Now the dispute is heating up again. A lawsuit accusing MasterCard and Visa of antitrust violations is expected to go to trial in Brooklyn. NPR's Jim Zarroli reports. Cost of credit-card enticements for consumers add up Credit Card Hike in Fees Hurt Small Businesses Congress Begins to Investigate Interchange Fees “The interchange fees, those charged to and by each of the participants in any card transactions (consumer, merchant and financial institution), have been especially troublesome in recent years, as card giants MasterCard Worldwide and VISA USA have sought to have their issuing banks and credit unions pay off expensive legal costs, including the $3-billion anti-trust settlement with Wal-Mart Stores and a broad group of retailers.” Consumer Groups Call for Credit Card Fee Probe Consumer Groups Call for Credit Card Fee Probe Summer heat wave sweep judiciary hearing The Credit Card Fee You Don’t Know About Senate Judiciary Debates Interchange Curbs “Bill Douglass, CEO of Sherman, Texas-based Douglass Distributing, a convenience-store operator and gas distributor, complained that card interchange fees had become the third-largest operating cost both for his business and for convenience stores as a whole, exceeded by only payroll and rent.” Senate Suspicious of Interchange Pricing "Senator Arlen Specter, R-Pa., chairman of the Senate Judiciary Committee, today called credit card late fees "astounding" and said that he receives "quite a few complaints from Pennsylvanians" about the credit card industry." Congress to check out credit card companies Visa And Mastercard Face Investigation By The American Congress Merchants seek congressional action on interchange fees Retailers Seek Fee Rules for Credit Cards Retailers Testify on Interchange Rates Visa, MC Lambasted in Hearing on Fees "Retailers tell me that interchange fees represent an increasingly large portion of their costs of doing business," Sen. Leahy said. UPDATE:Merchants Seek Lawmakers' Intervention On Card Fees Kathy Miller testified in front of the U.S. Congress about so-called interchange fees. They're levied by credit card companies on every transaction. Lawmakers are concerned because the fees are set privately by companies and are not negotiable. The Senate Judiciary Committee is looking into whether they violate antitrust provisions. "Especially when you're dealing with small stores, typical of what we have in Vermont, they can get killed by the charges, and they have no way of effectively challenging those charges," said Sen. Patrick Leahy, D-Vermont. Small Businesses Offer Senate Testimony Against MasterCard and Visa Over Interchange Fees Partisans Square off Again As the Interchange War Moves to the Senate Visa, MC Face Congressional Inquiry Over Fees Vermonter Testifies On Credit Card Fees Elmore County Stores Owner Testifies Before Senate Committee About Credit-Card Fees MasterCard Shareholders Elect New Directors To Board "The Merchants Payments Coalition believes it is prudent for Congress to provide a framework for relief with respect to the antitrust issues raised by the card associations' price-fixing activities," said Stephen Cannon, an attorney representing the Merchants Payments Coalition Inc., in testimony before a Senate Judiciary Committee hearing. Hidden Credit Card Fees Hurt Businesses and Consumers "The bad news for consumers and for businesses is that Visa and MasterCard wrote the rules, so it makes it virtually impossible for merchants to tell consumers how much interchange fees cost them, and the fees remain hidden." Mastercard CEO gives update on lawsuits Senate Panel Will Host Showdown Between Banks, Retailers Retailers have launched a campaign against the fees credit card companies charge stores for each transaction when customers use Visa or MasterCard. Those fees average about 2 percent. They argue that some credit card company contracts require stores to build the transaction fee into the price of merchandise, forbid the fee from being shown on receipts and block cash discounts for some purchases. The National Retail Federation, American Petroleum Institute, the National Association of Convenience Stores, the National Council of Chain Restaurants, the National Grocers Association, the National Restaurant Association and others have united for this fight to form the Merchants Payments Coalition. Stores Fighting Credit Card Fees Leading the charge Customers like debit cards, but small merchants don’t Those costs can include a percentage of every individual sale or a fee for every transaction. Rates and fees vary, depending on the banks involved. In addition, a business must either rent or buy a machine to run the cards. “It’s kind of hard when you have $1, $2 items, then you lose 20 to 30 percent of that in fees,” said Tony. A Sea Change in Surcharge MasterCard IPO Shifts Risk from Banks to Investors Credit Card Companies to Rake in Millions This Weekend at the Pump at the Expense of Holiday Travelers Windfall Profits for the Credit Card Companies This Weekend Credit Card Fees Hurt Businesses Gas Station Owners Feel the Pump Pain, Too Plastic Under Attack Price-Fixing Charges Spread To Debit Market NEW YORK -- A broad group of merchants amended its antitrust suit against Visa, MasterCard and several major banks alleging the companies conspired to fix prices in debit, as well as credit card markets. The complaint, originally filed last November, alleges that Visa and MasterCard are able to set interchange fees without regard to market forces. "We believe that price fixing of interchange is equally as problematic in debit cards as it is in credit cards," said Henry Armour, president of the National Association of Convenience Stores, one of the parties to the suit. Visa and MasterCard, both controlled by large banks, control an estimated 85% of the $30 billion a year market in interchange fees. N.Y. Bill to Keep Sales Tax Out Of Fee Formula The bill is another attempt by merchants to counter the rise in fees charged by banks that issue Visa and MasterCard products. Visa U.S.A. and MasterCard International face a slew of lawsuits from merchants who say the way interchange rates are set violates the Sherman Antitrust Act. Merchant fees across the country are calculated on the basis of the transaction's entire amount, including any applicable sales tax. The bill, which would amend New York's general business law to exclude the "sales and use tax" from the calculation, says a lack of competition in the credit and debit card industry has caused "interchange fees to grow exponentially with both rates and volume increasing." As a result, consumers and merchants suffer from "a price scheme established by the credit and debit card companies." NEW YORK COULD BAN TAX AS PART OF INTERCHANGE Credit Card Fee Adds to Increase at the Pump Card Companies Are Filling Up at the Station Merchants Balk at Credit Card Fees Interchange Fees Around the World MasterCard Criticized on Bank Fees By Europe MasterCard Faces EU Antitrust Charges UK OFT To Probe New MasterCard Fees Australian Central Bank Imposes Further Card Fees Cap Frequently Asked Questions What are interchange fees? Interchange is a percentage of each transaction that Visa and MasterCard banks collect from retailers every time credit or debit cards are used to pay for a purchase. The fee varies with type of card, size of merchant and other factors, but averages close to 2 percent for credit card and signature debit transactions. Total credit and debit card interchange collected by Visa and MasterCard amounted to more than $30 billion in 2004, according to the Nilson Report, a business magazine that covers the credit card industry. What percentage of a retail transaction do these interchange fees cost? Credit and debit card interchange fees average close to 2% on each card transaction. That’s close to $2 out of every $100 consumers spend. How much do hidden interchange fees cost consumers? All Americans pay this hidden fee on virtually every transaction they make, whether they use a credit card or not, in the form of higher prices for consumer goods and services, which adds up to tens of billions of dollars a year. According to the Nilson Report, a business magazine that covers the credit card industry, American consumers paid more than $30 billion in credit card interchange fees in 2005 alone - more than six times what they paid in ATM fees ($4.2 billion) the same year. How are interchange rates determined? Visa and MasterCard both meet behind closed doors to establish interchange rates. Typically, new rates are announced in April and October of each year, and when viewed across all of the interchange categories result in higher total fees. Because this is done in secret, we do not know enough about how these rates are set. And Visa and MasterCard wrote the rules that make it virtually impossible to tell consumers how much interchange fees cost them. The bottom line is that the interchange rate is largely based on the dollar amount of the transaction. The more expensive the transaction, the higher the hidden cost to consumers. How much are interchange fees increasing? Interchange fees have more than doubled in the last 10 years. Credit card companies can increase interchange rates at any time by any amount. The total fees paid by merchants for interchange increases in three primary ways: (1) an increase in the set interchange rate; (2) the clear trend of card based payments as a preferred tender type; and (3) as a function of transaction totals that increase when the cost of goods and services rise. Visa and MasterCard also raise fees by increasing compliance requirements for merchants. This makes merchants spend more or fall into a category that gets charged more interchange. Don’t these fees just cover Visa and MasterCard’s cost of processing the transactions? That’s what consumers might be led to believe, but the truth is that interchange fees are far higher than the actual processing and related costs of the transactions. In fact, in other countries around the world, interchange rates are established as low as about one-third of what they are in the U.S. The fact that consumers in countries around the world are charged substantially lower credit card interchange fees than in the U.S. clearly indicates that there is room to reduce these rates and still cover the cost of the actual transactions International Differences How do interchange rates in the U.S. compare to other parts of the world? Visa and MasterCard charge Americans among the highest credit card interchange fees in the world. The total interchange cost to U.S. consumers has doubled over the last ten years to $30 billion even though the technology used to process credit card transactions is more efficient and less expensive today. U.S. interchange fees are close to 2%, while other industrialized countries’ fees are less: the UK is about 0.7% and Australia averages 0.55%. This difference translates into hundred of dollars in added costs to the average American family. Why are interchange fees highest in the U.S.? Only Visa and MasterCard know the answer to that. The fact is the total cost to consumers has doubled over the last ten years even though the technology used to process credit card transactions is more efficient and less expensive today. In fact, interchange fees are far higher than the actual processing and related costs of card transactions. This is supported by the fact that many other countries with significantly lower interchange rates have not experienced disruption in transaction handling processes despite the lower rates in those countries. Disclosure & Competition Do consumers who pay with cash also pay a hidden fee? Absolutely! And what could be more unfair than forcing all consumers to pay a fee even if they don’t use plastic? In fact, Americans pay a hidden fee on virtually every transaction they make, whether they use a credit card or not, costing consumers tens of billions of dollars a year in the form of higher prices for goods and services. Furthermore, the system is structured such that credit card companies make more money on each transaction when the price of retail goods increases. For example, even though the cost of processing a $1 transaction is virtually the same as processing a $100 transaction, the interchange fee paid on that $100 sale is higher because interchange is calculated as a percentage of the total sale. The higher the sale, the higher the hidden fee. Why does MPC single out Visa and MasterCard more than the other card issuers? With about 80 percent of the card market, Visa and MasterCard dominate the market and control a system that is fundamentally anti-competitive. Why does the MPC think the interchange system is anti-competitive? Rather than competing to set the lowest fees and hold down costs for consumers, Visa and MasterCard’s idea of competition is to set the highest rates in order to maximize profits for the banks that issue their cards. In addition, the banks that make up Visa and MasterCard have colluded to set these fees, operating in two price-fixing cartels that would be a clear violation of federal antitrust law in any other industry. Aren’t interchange fees legal because every business establishes a price for the goods and services it provides? Interchange fees are the result of illegal price fixing by the bank members of MasterCard and Visa. When competitors agree on the prices they will individually charge others, that is price fixing! The card associations, themselves, serve as “hubs” to facilitate the unlawful collective price setting by their card-issuing banks. U.S. Government Action What action is taking place to stop hidden fees? In the U.S., the issue of interchange fees has emerged as a major public policy concern in the past year. All three branches of the U.S. Government have been asked to look into the unfair credit card interchange pricing system. The Federal Reserve held two conferences last year on the subject, the House held a hearing in February and now the Senate is launching a hearing of its own. In addition, more than 50 lawsuits, with plaintiffs representing tens of thousands of merchants, have been filed in federal court claiming that interchange-related practices violate federal antitrust laws. What does MPC hope to accomplish with a hearing in the Senate Judiciary Committee? A key issue for the Judiciary Committee is the anti-competitive way these fees are set. Rather than competing to set the lowest fees and hold down costs for consumers, Visa and MasterCard’s idea of competition is to set the highest rates in order to maximize profits for the banks that issue their cards. In addition, the banks that make up Visa and MasterCard have colluded to set these fees, operating in price-fixing cartels that would be a clear violation of federal antitrust law in any other industry. The Merchants Payments Coalition What is the Merchants Payments Coalition? The Merchants Payments Coalition is a group of 20 trade associations representing retailers, supermarkets, drug stores, convenience stores, gas stations, on-line merchants and other businesses that accept debit and credit cards. MPC is 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 locations with approximately 50 million employees. |
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