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MERCHANTS RESPOND TO QUESTIONS ABOUT IMPACT OF INTERCHANGE FEES
Facts About Interchange Fees Contradict Card Company Claims

Washington, D.C. - October 1, 2007 - The Merchants Payments Coalition today delivered to members of the House Judiciary Committee's Antitrust Task Force a detailed report responding to questions about Visa and MasterCard's hidden credit card interchange fees raised by Representative Ric Keller, R-Fla., at a recent hearing.

"This report separates facts from fiction on credit card interchange practices," said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. "The credit card industry has made numerous questionable statements. We have attempted to set the record straight."

Duncan testified on behalf of the MPC during a July 19 hearing on credit card interchange held by the Antitrust Task Force, arguing that Visa and MasterCard practices in setting interchange rates constitute a violation of federal antitrust laws that costs merchants and consumers more than $40 billion a year. During the hearing, Keller identified a number of key issues on which merchants and witnesses for the credit card industry had made conflicting statements.

Following are key points raised by Keller, and MPC's responses. 

  • Merchants say Visa and MasterCard keep their operating rules secret, but Visa and MasterCard say the rules are posted on their web sites. Fact: Visa and MasterCard both post excerpts from their rules on their web sites, but not the complete rules needed for a full understanding. Visa offers to show merchants a fuller set of the rules, but only if they sign a non-disclosure agreement prohibiting discussion of what they see.
  • Merchants say they are not allowed to offer cash discounts, but Visa and MasterCard say cash discounts are allowed. Fact: Federal law prohibits a ban on cash discounts, but credit card company rules make cash discounts extremely difficult to offer. Visa in particular has attempted to characterize some cash discounts as a prohibited surcharge on credit card use, and has threatened some merchants with fines of $5,000 a day for offering cash discounts.
  • Merchants say interchange rates are non-negotiable, while Visa and MasterCard say they can be negotiated. Fact: Merchants are not part of the process when interchange rates are set and cannot negotiate interchange rates with Visa or MasterCard. Courts have held that Visa and MasterCard dominate the credit card market, and the Kansas City Federal Reserve found that the popularity of cards among consumers gives merchants no realistic choice but to accept Visa and MasterCard regardless of rates.
  • Merchants say interchange fees hurt consumers while Visa and MasterCard say interchange fees benefit consumers. Fact: Interchange fees do pay for rewards programs offered by credit cards, but the fees mean that all consumers pay for rewards whether they take advantage of them or not. All consumers shoulder the burden of interchange as the fees are passed along in higher prices, with the average family paying an extra $300 because of interchange fees in 2006.
  • Visa and MasterCard claim retailers are asking for price controls, while retailers say they want only competition. Fact: Merchants have not advocated price controls, either in testimony before Congress or in meetings with members of Congress. Claims that merchants are advocating price controls are false.
  • Visa and MasterCard say retailers who accept any Visa credit card should be required to accept all Visa credit cards and the same for MasterCard, while retailers say they should be allowed to choose which cards to accept. Fact: Visa and MasterCard each have an "honor all cards" rule requiring merchants who accept any credit cards under the Visa name or MasterCard name to accept all credit cards issued under that name. Merchants believe this is a key part of the problem, because even if banks competed to offer lower interchange rates, merchants would still be required to accept those with high interchange rates. Also, card issuers do not currently provide merchants with the information necessary to know the exact interchange rate being charged when a card is presented at the register.

The MPC is a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses that accept debit and credit cards 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 more information, visit www.unfaircreditcardfees.com.