Now Visa and MasterCard Are Concerned About Consumer Card SwipeFees?

{via NCASOnline]

WASHINGTON – Visa, MasterCard and its member banks have created a new Web site to bring down Senator Durbin’s swipe fees amendment, while villainizing retailers in the process: Consumers Against Retail Discrimination (CARD Alliance).

Mike Konczal, a fellow at the Roosevelt Institute, points to the “sincerity” of this new alliance in a Washington Post blog: “You have to suddenly believe that all these firms are suddenly very concerned about consumers paying fees. Did you catch that? Visa and the major banks are worried that you may have to pay a fee!”

Konczal continues pointing out the problem with the coalition’s argument, which claims that “If interchange revenue were artificially limited by the government, the millions of consumers who use small financial institutions would be forced to turn to large, national banks for their debit cards — further consolidating the financial system.”

However, as the Durbin language states, the amendment exempts small financial institutions with less than
$10 billion from the reasonable debit fee requirement. “But read that again,” writes Konczal. “Citi, JP Morgan, and Bank of America are terrified about financial sector consolidation. Where were you guys on the SAFE Banking Act debate?!?”

Durbin even clarifies this point in a letter he sent to the Independent Community Bankers of America and the Credit Union National Association:

“I will tell you what I have told small banks and credit unions in my home state of Illinois — that my amendment does not disadvantage small banks and credit unions, and in fact goes to great lengths to protect their ability to successfully compete with big banks in offering payment cards to consumers. I urge you to accurately represent to your members what my amendment does, and to clarify any misimpressions of what it does not do. ”

The coalition also expresses concern about setting payment minimums for debit card users, which many consumers probably don’t even realize is a “no-no” according to a retailer’s operating rules. “Part of this law gives them [retailers] a legal option in setting a minimum. Many places have off the books minimums that you’ve probably already seen — hopefully that quote above gives you a sense why,” writes Konczal.”

And “that quote above” comes from Jinger Duryea, president of C.N. Brown Company, the Big Apple Food Stores, in Maine:

“Credit cards are the lifeline of my business as customers use plastic for everything from; a cup of coffee, to a pack of gum, to a tank of gasoline. Credit cards and debit cards are easy to use, but what customers don’t know is that every time they use a credit card, I pay a fee. For example, a customer purchases a local newspaper (75 cents retail), my profit is 9 cents. If the customer is using a debit card I would pay 25 cents for the transaction fee plus .08% interchange fee. If the customer puts down a Visa credit card the transaction fee would be 19 cents plus 1.68% interchange fee. Regardless of the payment option I lose money on the sale.”

“[G]iving businesses choices over their payment mechanism is the whole point of this amendment. A little bit of price transparency, competition between paying options and a little bit of actual decision-making by someone other than a duopoly can do wonders in creating an actual market mechanism,” notes Konczal, advising Washington Post readers to “Make sure you know the facts of this very market-friendly way of trying to regulate this duopoly before you make a judgment on whether or not to support it.”

CARD Coalition Gets “Warm” Welcome.


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