Merchants Welcome Senate Legislation to Fix the Problem of Hidden Credit Card Interchange Fees
Washington, D.C. - June 5, 2008 - Today Senator Richard Durbin (D-IL) introduced the "Credit Card Fair Fee Act of 2008," legislation that addresses the biggest credit card fee of all - the interchange fee, which cost Americans $42 billion last year. The House version of the bill was introduced in March by Rep. John Conyers (D-MI) and Chris Cannon (R-UT) and has received bipartisan support.
"We welcome this effort to stop the price-fixing and create a transparent market-based process for credit card interchange fees," said Hank Armour, President and CEO of the National Association of Convenience Stores (NACS), a member of the Merchants Payments Coalition (MPC). "This legislation is an approach to fix the broken system through a competitive market outcome by allowing merchants a seat at the negotiating table." Currently, credit card interchange rates are set in secret, hidden from view and exclude merchants from the negotiating process.
With a collective market share of approximately 80 percent, Visa and MasterCard operate like price-fixing cartels, each one imposing oppressive credit card interchange fees and rules on merchants on a ‘take-it-or-leave-it' basis. According to Senator Durbin, the legislation introduced today "will protect consumers and retailers by preventing credit card companies from using their market power to charge unreasonable fees through an unfair process."
Late last month, Senator Durbin, along with Senators Snowe, Kohl and Specter, sent letters to Visa and MasterCard asking for a detailed explanation of the process by which they set their interchange fee rates. According to a statement by Senator Durbin, responses by the card companies again failed to adequately explain how they decide what interchange rates to charge.
Interchange fees amount to approximately $2 of every $100 spent using credit cards. These fees inflate the cost of nearly everything consumers buy whether they use plastic, cash, check or food stamps. In effect, most consumers are taking two hits to their wallet: one from the interchange fee and ones from the fees in their statement.
"Interchange fees are the biggest credit card fee you've never heard of," added Armour. 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. "If we do not act now, we will continue down the road of unaccountable fee-setting which will lead to more harm to retailers and consumers in the form of high 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 http://www.unfaircreditcardfees.com.