House Judiciary Committee Chairman John Conyers (D-Mich.) and Rep. Chris Cannon (R-Utah) yesterday introduced the "Credit Card Fair Fee Act", legislation that for the first time deals with the biggest credit card fee of all–the interchange fee, which grew to $36 billion in 2006.
"We welcome this effort to stop the price-fixing practices of the credit card industry and create a transparent market-based process," said Mallory Duncan, chairman of the Merchants Payments Coalition (MPC) and senior vice president and general counsel of the National Retail Federation.
"This legislation will bring competition to a severely broken system that unjustly inflates the cost of goods and services for all consumers. Virtually every developed economy in the world has found these fees abusive and illegal, even at levels far lower than what Americans pay. We can now work toward a solution where economies of scale, innovation and competition, the forces that drive free enterprise — decide credit card processing fees," said Tim Hammonds, Food Marketing Institute president and CEO, an MPC member.
Currently, credit card interchange rates are set in secret and hidden from view. Raising interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards, as long as rising rates are kept top secret, consumers have no way of knowing the extra costs they are paying through higher prices.
"As entrepreneurs and businessmen, we want market based solutions to our issues," said Richard Oneslager, president of Balmar Petroleum and chairman of the National Association of Convenience Stores, an MPC member. "The Credit Card Fair Fee Act is the free-market solution to the battle over interchange rates."
Interchange fees amount to approximately $2 of every $100 spent using credit cards. These fees inflate the cost of nearly everything consumers buy even when they pay by cash.
With a collective market share of approximately 80%, 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. Credit card industry policies and practices make it practically impossible for merchants to know how much they are really paying in credit card fees or why.
"Interchange fees are the biggest credit card fee you’ve never heard of," Duncan said. The $36 billion in interchange fees paid by retailers and consumers in 2006 dwarfed most other credit card fees put together, including late fees, over-the-limit fees, annual fees and inactivity fees.
Over the last three years, unfair credit card practices, policies and fees have been scrutinized by the public, consumer groups, the Federal Reserve, and Congress. Interchange fees have been the subject of hearings three times in recent years under both the Republican and Democratic Congresses.
Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the lack of competition in the credit card marketplace. The "Credit Card Fair Fee Act" is a direct outgrowth of the Antitrust Task Force’s bi-partisan examination into the fees, policies, and practices of the credit card industry.
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 information, visit www.unfaircreditcardfees.com.