Published: July 2008
Merchants get Congressional help on fair interchange fees
The Credit Card Fair Fee Act of 2008 (HR 5546) would allow merchants to negotiate directly with the card associations in an effort to lower interchange rates.
Consumer Action is monitoring legislation that would address the growing costs of credit card interchange fees. Interchange fees continue to rise and major credit card payment networks set the prices, leaving most retailers with no alternative other than to accept their credit cards interchange fees. Interchange fees amount to approximately $2 of every $100 spent using credit cards. Interchange fees must be built into the price of all goods and services so even consumers who pay with cash, checks, and food stamp benefits are paying interchange fees.
H.R. 5546, The Credit Card Fair Fee Act of 2008, would allow merchants to negotiate directly with the card associations in an effort to lower interchange rates. Introduced by House Judiciary Chairman John Conyers (D-Mich.) and Representative Chris Cannon (R-Utah), H.R. 5546 has bipartisan support in the House of Representatives.
The negotiation process would allow merchants to present their desired rate and the banks and credit card associations will present their rate. Should negotiations reach a stalemate with no solution in sight, the decision on a final rate would then move to a review board that would make the final binding decision.
Consumer Action has taken no position on this bill, but we are sympathetic to the merchants' point of view. Visa and MasterCard control over 80% of the payments card market. This creates a take-it-or-leave-it situation in which merchants have little choice whether or not to accept the prices set by Visa and MasterCard.
Interchange fees are a flat fee plus a percentage of the price of a good or service. In a struggling economy, as consumers shift to credit cards to pay for common household items such as milk and bread, retailers may lose revenues, and increase prices, while the banks and credit card companies gain profits.
Small businesses may have an even more difficult time absorbing the added costs. According the the National Restaurant Association, interchange fees have increased over 117% or more since 2001, exceeding health care and energy cost increases by a wide margin.
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