Visa/MasterCard Market Power Problematic:
“Although issuers incur costs for offering cards, concerns remain about the extent to which interchange fee levels closely relate to the level of card program expenses or whether they are set high so as to increase issuer profits. In a competitive market, the price of the product and the cost of producing it would be closely aligned. However, producers with market power—such as monopolists or those offering goods not generally offered by others—have the ability to charge high, noncompetitive prices.”
[GAO Report 10-45, Credit Cards, 11/19/09, p. 21, emphasis added]
Swipe Fee Reform Will Reduce Consumer Prices:
“A significant advantage of capping or limiting interchange fees would be that it would reduce interchange fee costs most directly. The experience in Australia indicates that this option does lower merchant costs and Australian regulators and merchant representatives insist that consumers have also benefited, arguing that merchants in competitive markets generally lower prices.”
[GAO Report 10-45, Page 48, emphasis added]
Visa, MasterCard, Big Banks Mislead & Obstruct GAO Investigators:
“Visa and MasterCard officials told us that their average effective interchange rates applied to transactions have remained fairly constant in recent years when transactions on debit cards, which have lower interchange fee rates, are included.However, our own analysis of Visa and MasterCard interchange rate schedules shows that the interchange rates for credit cards have been increasing and their structures have become more complex, as hundreds of different interchange fee rate categories for accepting credit cards now exist.”
[GAO Report 10-45, p. 14, emphasis added]
“We were not able to obtain data from the largest card issuers about their revenues, profits, or expenses to compare interchange fee revenues with expenses.”
[GAO Report 10-45, p. 23, emphasis added]
Numerous studies have been conducted by federal agencies, the GAO, academics and the Federal Reserve, each one each identified market problems caused by swipe fees. Now some in Congress want to undo the meaningful reforms past a year ago, proposing instead to conduct yet another study. With relief just three months away, Congress should stand up for small businesses and consumers and leave swipe fee reform alone!
For a summary of the many reports, studies and expert commentary related to swipe fee reform visit http://www.unfaircreditcardfees.com/testimony-reports