| Credit Card Fair Fee Act |
| By Credit Federal |
Published
03/23/2008
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Credit Card
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Federal Government wants to impose limits on credit card companies with the Credit Card Fair Fee Act
As consumers, in addition to credit card interest rates we're all aware of credit card fees imposed upon us. Other than switching to another, competitor card issuer, there's not much else a consumer can do. Yet consumers are not the only ones who get pinched with fees. Merchants (retailers, sellers, etc) must pay transaction fees to credit card companies for processing purchases used with credit cards. These fees can impact a merchant's profit margin, yet merchants simply cannot refuse to accept credit cards or they risk losing valuable business altogether.
There may be help for them. A bipartisan group of House members introduced the Credit Card Fair Fee Act of 2008 as H.R. 5546.
House Judiciary Committee Chair John Conyers and Rep. Chris Cannon introduced the measure to help level the playing field for merchants and retailers negotiating with banks for the cost of certain fees, and ultimately reduce the costs of everyday goods for consumers.
In the current playing field, merchants are forced to deal within this system because it is simply not an option to refuse to accept cards such as Visa or MasterCard from their customers. They are presented with take it or leave it options and are not part of the process by which the fees are set. Moreover, the card systems operate pursuant to comprehensive operating rules approved by the associations' member controlled boards, but these operating rules are not accessible by the merchants. The legislation is intended to give merchants a seat at the table in the determination of these fees. It is not an attempt at regulating the industry and does not mandate any particular outcome. The legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees.
According to John Gay, senior vice president of government affairs and public policy for the National Restaurant Association, "Many of our members have expressed concern about the unexplained increases in fees and inability to negotiate a fairer rate with credit card companies. The Credit Card Fair Fee Act is a solution to an issue that poses a burden to small businesses, including restaurants, across the country."
Interchange fees are meant to cover the cost of processing a credit card transaction and the risk taken by the issuing bank that it will be repaid. However, reports show that the cost of processing is steadily decreasing in the United States, while fees continue to rise. The result appears to be an increase in revenue for the card issuer and a drain on a business's bottom lines. Interchange fees amount to approximately $2 of every $100 spent using credit cards. 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 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.
MasterCard's Response to the Credit Card Fair Fee Act of 2008
The electronic payments system benefits merchants and consumers because it is a highly efficient and secure way to increase sales and consumer satisfaction. The system was developed in the highly competitive marketplace of merchants, banks, payment networks and consumers.
This legislation is an attempt by merchants and the Merchants Payments Coalition to put in place price controls, which will harm competition and the card products and services offered to consumers.
MasterCard believes there is no need for government intervention, and that it would be inappropriate for the U.S. government to set prices and negotiate the terms of contracts for private commercial entities. Such policy decisions in the past have proven to be unworkable, unpopular and detrimental to the free market economy. There is no evidence that demonstrates that such price controls will result in savings passed along to consumers. To the contrary, we believe such moves negatively impact consumer choice.
We will continue to work with our customers and other industry organizations, like the Electronic Payments Coalition, American Bankers Association, National Association of Federal Credit Unions, Independent Community Bankers of America, and the American Financial Services Association, to help members of Congress enhance their understanding of how interchange brings benefits to millions of consumers and merchants around the world.
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