NRF Supports Credit Card Swipe Fee

The National Retail Federation is urging the House Judiciary Committee to approve legislation that would require Visa and MasterCard banks to negotiate over the terms and conditions associated with the $48 billion in credit card swipe fees paid by merchants and their customers each year

"The fact that you’re seeing this issue being widely discussed both here in Washington and in the states shows that people have finally come to understand the huge financial impact these fees have on consumers and the economy," NRF Senior Vice President and General Counsel Mallory Duncan said. "It has become clear to lawmakers that these fees drive up consumer prices. We can't afford to have this much money diverted into banking profits at a time when Main Street businesses and working families are struggling to recover from the economic downturn."

NRF testimony before the committee last week "makes it clear that practices in setting swipe fees have violated federal antitrust law, and that most of these fees go to the nation’s largest banks, not local lending institutions," Duncan said. "If big banks can be required to negotiate with merchants the same as any other vendor offering a service, we can bring these fees down to a level that more fairly reflects the value of the service provided."

Sponsored by Chairman John Conyers, D-Mich., and co-sponsored by Representative Bill Shuster, R-Pa., H.R. 2695, or the Credit Card Fair Fee ActOpens in a new window, would require credit card systems possessing "substantial market power" to negotiate with merchants to reach a voluntary agreement on credit and debit card terms and conditions. Under current practice, Visa and MasterCard--the only two card systems that meet the definition of holding "substantial market power"--have always refused to negotiate over the fees, instead unilaterally imposing them on merchants.

The Vermont legislature is considering a bill that would bar card companies from interfering in retailers' ability to set minimum credit card purchases or to offer a discount for cash, checks, debit cards or credit cards with lower-than-normal swipe fees. A number of other states are also considering swipe fee-related legislation.

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Senator proposes limiting credit-card swipe fees

Sen. Dick Durbin, D-Ill., introduced three amendments to the bank-reform bill to control how much credit-card issuers charge merchants when consumers pay with a credit card. If enacted, the proposals would sharply dent the more than $40 billion in fees collected annually by card-issuing banks.

Interchange fees, also referred to as "swipe fees," are set by MasterCard and Visa, and vary from merchant to merchant and card to card. They average about 2% for credit-card transactions, and are higher for rewards or corporate cards.

Retailers loathe the fees because they eat into profits. Credit-card issuers, however, say they're needed to cover transaction costs, including losses from consumers who don't pay their bills.

"We're not saying there should not be an interchange fee," Durbin said on the Senate floor this week. "We are saying it should be reasonable."

His amendments, which are opposed by major credit-card networks and issuers as well as credit-union and community-bank trade groups, call for allowing merchants to offer discounts to consumers who use cash, debit or a particular card network, say a MasterCard instead of a Visa.

Another amendment, offered as an aid to small businesses, would allow merchants to set minimum and maximum purchase limits -- something major card issuers don't allow and threaten to fine businesses that set them.

Durbin's also looking for the lowest rates possible to apply to government credit-card transactions, noting that consumers are increasingly using plastic to pay for such things as tax payments, toll fees and dog licenses. He called the U.S. government a "major user" of credit cards.

This is the third time in two years that Durbin has floated proposals aimed at curbing interchange fees. MasterCard and Visa have lobbied hard against any changes, as have the major banks that issue the cards. The fees represent a key revenue component for those banks, which have seen the CARD Act strip away or significantly reduce other sources of income in the last year.

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