For years, retailers and merchants have been waging a quiet war with the financial industry over “interchange fees” — the hidden costs of processing credit and debit card transactions that can wipe out a store’s profits while earning banks a pretty penny.
Last year Congress stepped into the fracas with legislation that would enable merchants to negotiate the fees they pay for taking plastic.
The Credit Card Fair Fee Act of 2008, was introduced by House Judiciary Committee chairman John Conyers (D-MI), its companion bill was sponsored by Sen. Richard Durbin (IL). The bill would require lenders possessing “substantial market power” to negotiate with merchants and retailers on terms for fees paid when processing card transactions.
If a voluntary agreement cannot be reached, both sides would have to submit to binding arbitration overseen by the Justice Department and the Federal Trade Commission (FTC).
“This legislation is intended to give merchants a seat at the table in the determination of these fees,” Conyers said. “It is not an attempt at regulating the industry and does not mandate any particular outcome. This legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees.”
The bill is set to be re-introduced in the Senate shortly, with a House introduction not far behind.
Watch a commercial from the Merchant Payment Coalition:
American merchants and consumers are currently charged among the highest credit card interchange fees in the industrialized world, amounting to approximately $2 for evry $100 spent using credit cards.
The fees are set by credit card issuers, and since there are so few issuers (Visa, MasterCard, American Express and Discover) this creates a take it or leave it situation for merchants.
Interchange fees are built into the price of all goods and services, causing both consumers and merchants to pay these increased costs.
Interchange fees have increased over 117% since 2001 despite factors that should cause them to fall such as: increased volume, lower interest rates, lower fraud and improved technology. US interchange fees are among the highest in the industrialized world, up to three times or more higher then what British, Australian or European consumers and merchants pay.
Franchisees have the ability to negotiate many of the other costs of doing business including: rent, salary, etc. but they cannot negotiate interchange fees with Visa or Mastercard.
The Credit Card Fair Fee Act would create transparency within the system and allow merchants to negotiate their rates.
The Coalition of Franchisee Associations (CFA) is a member of the Merchant Payments Coalition which strongly supports the bill and whose mission is to promote a more competitive and transparent card system.
For information visit: Unfair Credit Card Fees
ACTION ALERT: Contact your elected officials and tell them how you feel: Stop Unfair Credit Card Fees