Credit Card Fair Fee Act Picks Up Bi-Partisan Support
Legislation will address credit card industry practices that hurt small business and their customers
Washington, D.C. - June 25, 2008 - Senator Kit Bond (R-MO) recently lent his support to the "Credit Card Fair Fee Act of 2008," legislation introduced by Sen. Durbin (D-IL) that addresses the biggest credit card fee of all - the interchange fee, which cost Americans $42 billion last year. The bipartisan House version of the bill was introduced in March by Reps. John Conyers (D-MI) and Chris Cannon (R-UT).
"Throughout my home State of Missouri, I have heard retailer concerns - especially those from small businesses - about credit card interchange fees. As a long-time advocate of small businesses, it troubles me that small businesses feel powerless in negotiating interchange fees. To address their concern, I co-sponsored the Credit Card Fair Fee Act of 2008, to give small businesses a fair opportunity to negotiate the setting of these fees. This legislation is an important step in raising awareness on this issue. I will examine all options and am committed to working with all parties involved to find a fair solution for small businesses in Missouri and across the country," said Sen. Bond. In Missouri, there are more than 1 million residents employed by more than 1,000 small businesses.
The "Credit Card Fair Fee Act," S. 3086, would put an end to the stronghold that the big card companies have over retailers with regard to the practice of interchange fee setting. Specifically, the legislation would allow for the first time open market negotiations between retailers and Visa and MasterCard. Currently, rates are set in secret and the process used by the credit card industry is hidden from view making it practically impossible for retailers to know how much they are really paying in credit card fees, or why.
With a collective market share of approximately 80 percent, Visa and MasterCard impose unfair and costly fees and rules on merchants. Interchange fees vary with the type of merchant, the transaction and the card, but average about $2 of every $100 spent using credit cards.
For many small retailers, the cost of interchange fees is taking its toll. For example, gasoline retailers, 90% of whom are small business owners, paid more than twice as much to the credit card industry ($7.6 billion) as they made in pre-tax profits ($3.4 billion) in 2007.
The "Credit Card Fair Fee Act" is not an attempt to mandate a particular outcome. This legislation simply enhances competition by allowing merchants to negotiate openly and fairly with Visa and MasterCard for the terms and rates of the fees.
Interchange fees are the biggest credit card fee you've never heard of. The $42 billion in interchange fees paid by retailers and consumers in 2007 dwarfed most other credit card fees put together, including late fees, over-the-limit fees, annual fees and inactivity fees.
The credit card industry has come under increased scrutiny from the public, consumer groups, the Federal Reserve, and Congress in the past three years for their unfair credit card practices, policies and fees. Interchange fees have been the subject of hearings three times in recent years under both the Republican and Democratic Congresses.
The Merchants Payments Coalition (MPC), UnfairCreditCardFees.com, is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are 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. For further information, please visit www.unfaircreditcardfees.com.