MERCHANTS WELCOME HOUSE SCRUTINY OF HIDDEN FEES AND OTHER ABUSIVE CREDIT CARD PRACTICES
Washington, D.C. - April 27, 2007 - The Merchants Payments Coalition (MPC) welcomed comments by Rep. Melvin Watt (D-NC) criticizing the hidden credit card "interchange" fee that credit card companies charge merchants whenever a customer makes a purchase using a credit or debit card.
At a House Financial Services Subcommittee hearing yesterday looking into credit card industry practices and regulatory issues, Rep. Watt singled out interchange fees as a particularly serious problem. "Another major issue is interchange fees, hidden charges that nobody has focused on yet, but I hope we will get some testimony at this and subsequent hearings," Watt said.
Yesterday's hearing was the third this year during which members of Congress called for a closer examination of credit card interchange-related practices and policies. "We are very pleased that both the House and Senate are scrutinizing one of the most abusive credit card practices of all," said Mallory Duncan, senior vice president and general counsel at the National Retail Federation and chairman of the MPC.
"Interchange is the biggest fee you've never heard of, costing American consumers more than $36 billion a year. But unlike other credit card fees, interchange never shows up on your monthly statement. And credit card companies make it virtually impossible for merchants to tell their customers how much they are paying in interchange fees, even though these fees increase the price of everything we buy," Duncan added.
While the credit card companies claim that the need interchange fees to pay for transaction processing, in fact they spend only 13 percent of the interchange fees on this, according to an independent report published in 2006 by Diamond Management & Technology Consultants, http://c0462491.cdn.cloudfiles.rackspacecloud.com/Diamond.pdf. The rest goes to pay for rewards programs and those direct mail campaigns that flood mailboxes with over nine billion unsolicited credit card offers every year. As Rep. Watt observed during the hearing, "I get a solicitation a day asking me to take out a credit card -- someone is paying for those mailings."
The credit card interchange fee varies with the type of merchant, transaction and card, but it averages close to two percent for most credit card and debit card transactions. Visa and MasterCard collected more than $36 billion in hidden interchange fees last year alone, up 17 percent from 2005 and more than double what they collected just five years ago. The average American family now pays more than $300 every year in hidden credit card interchange fees.
At the state level, there are currently 15 pieces of legislation pending in 9 states relating to credit card interchange fees and other abusive credit card company practices.
MPC represents retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants, and other businesses that accept debit and credit cards. MPC member associations collectively represent nearly three million stores with approximately 50 million employees in 47 states. http://www.unfaircreditcardfees.com.