Congress Considers Credit Card Rules


On Thursday, the U.S. House Financial Services Committee held a hearing to evaluate the rules that Visa and MasterCard impose on retailers and on the proposed legislation to handle the issue, NACS reported.


One solution debated, which is strongly supported by NACS, was the Credit Card Interchange Fees Act of 2009 (H.R. 2382). This bill, sponsored by Reps. Peter Welch (D-VT) and Bill Shuster (R-PA), would eliminate the anticompetitive rules Visa and MasterCard impose on retailers.


“H.R. 2382 will begin to increase transparency in the payments card industry and make the true cost of card acceptance evident to consumers who have also been left in the dark to make an informed decision regarding their choice of payment. Getting rid of Visa and MasterCard’s restrictive merchant rules is a great step in creating a fair and transparent payments system that gives both consumer and retailers a choice,” NACS reported.


During his testimony, Shuster noted that Sheetz “paid twice as much in interchange fees as they took in net income after tax. Their second largest expense, after payroll, is the interchange fee. This means that for Sheetz, the interchange fee eclipses the company’s cost of rent for their 363 stores; and the interchange fee is one and a half times the cost of providing health care to their nearly 13,000 employees…Sadly, it [Sheetz] is joined by thousands of businesses across the country who are being unfairly penalized through interchange fees.”


Another witness, Kathy Miller, a small Vermont general store owner, explained that on a 99-cent bag of snack chips, she pays 74 cents to the manufacturer and 23 cents in credit card swipe fees, leaving her with only two cents to cover all her overhead. Miller noted that while the Welch-Shuster bill would be helpful, merchants also need to have the ability to set minimum dollar amount for accepting cards.


NACS and SIGMA submitted an industry point of view to the Committee that expressed that: “the bill will encourage retailers to make cash discounts more readily available to consumers, by prohibiting the card companies from dictating how retailers display prices, and will afford better choice to consumers and retailers in terms of methods of payments by allowing retailers to specify a preferred method of payment if they desire.


“The bill will discourage anti-competitive pricing and practices by the card companies, by restricting Reason Code 96 chargebacks and similar practices, and banning network routing restrictions. The burden on small businesses should be eased by prohibitions in the bill on minimum transaction volume requirements and penalties.”


Mallory Duncan, senior vice president and general counsel at the National Retail Federation, testified on behalf of the Merchants Payments Coalition in support of H.R. 2382. He also argued for a more transparent and competitive card system that works better for both consumers and merchants.


“The bill simply stands for the proposition that powerful credit card companies should have to play fair and disclose prices and terms. I doubt that anything I could say would demonstrate the problems in this market and the need for reform as eloquently as the credit card industry’s opposition to these basic principles. I strongly urge the Committee to pass this bill to bring some fairness to the interchange fee system,” Duncan said.






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