“NACS’ CEO Details Progress in Interchange Fee Fight” (via NACS)

CHICAGO — Calling outrageous credit card fees the most important battle faced by the industry, NACS President and CEO Hank Armour said the industry continues to put pressure on the issue, “2009 looks to be the watershed year in which we may finally get significant relief,” he said during the Opening General Session at the NACS Show 2008 on Oct. 5, 2008.

“This is the biggest issue that our industry has faced in decades, and we’ve taken it head on,” said Armour. “With the tremendous help and support of many of you, we made a lot of progress this year.” The Credit Card Fair Fee Act was successfully passed out of the House Judiciary Committee (H.R. 5546), and the legislation was also introduced in the Senate (S. 3086), he noted.

“We obviously have the credit card companies’ attention,” said Armour, referencing what he described as public relations stunts that Visa and MasterCard attempted this summer to deflect attention away from the issue of interchange. “While Visa and MasterCard claim they have fixed the problem, they haven’t. The only thing they fix — and they continue to do so — is the price,” said Armour to applause.

[Source: NACS – CS News, click here to read more]

Smart launch towards leadership, but it took $700 Billion to make washington listen

Finally, signs of reform and smart leadership in Washington!

The Congratulations to the U.S. House of Representatives. On Tuesday they passed the Credit Cardholders’ Bill of Rights Act.  It now requires passing by the U.S. Senate and the presidents signature.

Hopefully, no more unfair credit card merchant fees, moving forward.  The MDL antitrust litigation hopefully will take care of past abuses and penalties dating back to 2004, although I think it should date back, minimally to the early 1990s.

Will the president cave in to his banking buddies, or has the executive branch learned its lesson? Maybe they can next visit overturning the unfair and catastrophic penalty against working families and millions of consumers forced into bankruptcy, while Visa and MasterCard are shielded from fiscal liabilities?

The legislation did not, however address interchange fees, but hopefully, that will be forthcoming.   Merchant interchange fees are the key point of the Credit Card Fair Fee Act and represent nearly $50 billion in annual hidden taxes on Americans.

According to The Denver Post, “The Act stops unfair interest rate hikes retroactive to balances incurred under a previous rate; stops assessment of hidden interest charges on balances already paid off ; stops late fee charges even though consumers mailed payments 7 days ahead of the due date.

“Hidden Credit Card Fees Are Costing You” (via CNN Money)

New legislation may mean an end to interchange fees, which cost the average family more than $400 a year

By Jessica Dickler, CNNMoney.com staff writer

Last Updated: July 31, 2008: 5:20 PM EDT

NEW YORK (CNNMoney.com) — Swiping your credit card at the register may save you time, but it certainly won’t save you money. Thanks to hidden fees, credit card purchases are costing you more than you may know.

Whether you use a card or not, you’re probably paying more than $400 a year in “interchange fees,” which are factored into the prices of everything from gas to groceries.

Every time a credit card or debit card is used to pay for a transaction, merchants pay a “merchant discount fee” to the bank for processing the payment. That covers the cost of renting the credit card terminal, customer service and an interchange fee, which all adds up to about 2% per transaction.

The interchange fee is by far the biggest chunk of the merchant discount fee. But it goes largely undetected by consumers because it’s included in the advertised price of items and, merchants say, is too complicated to break out on individual receipts.

But credit card use has become so prevalent, it’s costing retailers a fortune in fees. So merchants pass on this cost to consumers by way of higher prices, which means that even shoppers who don’t use plastic end up paying more.

The average American family will pay $427 because of interchange fees in 2008, up from $378 in 2007, according to National Retail Federation estimates. The amount has nearly tripled from the $159 paid in 2001, the year NRF began tracking interchange fees. Collectively, that’s $48 billion that the credit card companies will make from interchange fees this year, up from $42 billion last year and $16.6 billion in 2001.

So where does all that money go? Credit card issuers use this revenue stream to pay for the processing, in addition to reward programs, credit losses and general operating costs.

But many consumer advocacy groups believe it’s time to put a stop to the bank fees that eat into retailers’ profits, and push up prices paid by consumers.

Congress takes action

“At a time when Americans are struggling to pay for groceries and to fill the gas tank, doing something about a hidden fee that drives up the cost of basic necessities should be one of Congress’ top priorities,” Steve Pfister, NRF senior vice president for government relations said in a statement.

Last week the House Judiciary Committee voted to move forward with the Credit Card Fair Fee Act of 2008, which requires lenders to negotiate with merchants and retailers on terms for fees paid when processing card transactions. The hope is that more flexibility to negotiate will bring interchange fees down, which will in turn allow merchants to keep their prices down. It also calls for the credit card companies and banks to be more transparent about their fee structures.

Most retailer and consumer groups support the change. As the legislation moves to the House floor, banking groups are voicing their opposition.

Edward Yingling, president and CEO of the American Banker’s Association, said in a statement that the bill “interferes with the smoothly functioning electronic payment system that currently works to the benefit of consumers, businesses and the broader economy.”

Not only would hindering the electronic payment system hurt businesses that benefit from faster transaction times and increased sales, the banking group said, but the legislation could also hurt consumers, by forcing credit card companies to raise their interest rates to cover costs.

Josh Floum, general counsel for Visa Inc., called the Credit Card Fair Fee Act “an anti-consumer bill that would mandate unnecessary regulatory intervention into a fiercely competitive industry that is benefiting consumers, merchants and financial institutions.”

And if passed, the bill would give more power to the largest retailers and therefore “suppress competition and innovation and result in unintended and harmful consequences for consumers,” Floum said.

MasterCard echoed the sentiment in a press release issued in response to the Judiciary Committee’s approval. “It would be inappropriate for the U.S. government to set prices and negotiate the terms of contracts for private commercial entities.”

But merchants aren’t buying it. Mallory Duncan, chairman of the Merchant Payments Coalition, a retailing advocacy group, said the system as it stands hurts retailers more than it helps them.

And retailers aren’t the only ones losing out, says Duncan. In tough economic times, consumers can’t afford to cough up extra cash to credit card companies. “They’ve had a very sweet ride for 30 years,” Duncan said.

Now lawmakers in Washington will duke it out. The issue pits those who say they are trying to alleviate the financial burden on consumers against those who are aiming to prohibit regulatory intervention and uphold the free market policy the credit card contracts are based on.

Congress is likely to vote on the Credit Card Fair Fee Act by the end of this year.

[Source: CNN Money]

“House panel favors retailers in vote to cut credit card fees” (via The Hill)

The House Judiciary Committee on Wednesday voted to give retailers a rare break from antitrust laws, approving legislation to allow them to band together when bargaining over the credit card fees they pay to banks.

The 19-16 bipartisan vote handed a victory to a coalition of supermarkets, convenience stores and big box retailers that has argued that so-called interchange fees are too high.

“We are very happy with the bipartisan vote and support that we got in the Judiciary Committee today,” said Chris Tampio, the senior director for government relations at the National Association of Convenience Stores , a coalition member.

The Electronic Payments Coalition , which represents banks and credit unions that collect the interchange fees, decried the legislation as “a sweetheart deal for giant retailers.”

Click here to read more

[Source: The Hill]

Three in Four Americans Support Credit Card Fair Fee Act

via MPC news release

National Poll Finds Voters Want To Rein In Hidden Credit Card Fees That Inflate Prices; Legislation Would End Credit Card Secret Price Fixing

Washington, D.C. – July 11, 2008 – Better than three in four (77%) voters favor the “Credit Card Fair Fee Act,” bi-partisan legislation that would empower retailers to negotiate credit card fees directly with the credit card industry as a means to cut interchange fees, according to a poll released by the Merchants Payments Coalition (MPC).

According to the survey, public sentiment that something needs to be done about the credit card industry is at an all-time high. Concerns about credit card industry fees, policies, and practices touch hot buttons across party lines: identical 51% majorities of Republicans and Democrats alike say they “strongly” support passage of the Credit Card Fair Fee Act.

Consumers are three times as likely to say credit card companies don’t do business the right way compared to cable companies and six times as likely to say that when compared to phone companies. In particular, nearly two in three (65%) say credit card companies don’t share their business values.

Credit card fees known as interchange have skyrocketed on food and gasoline in recent years; they cost Americans $42 billion last year. Revenue that goes to the credit card industry on motor fuels alone has risen steeply in the last year alone, closely following the accelerating price of gasoline.

Interchange fees amount to approximately $2 of every $100 spent using credit cards. These fees inflate the cost of nearly everything consumers buy at retail whether or not they use plastic, cash, check, or food stamps. In 2008, the average American family will pay upwards of $427 in hidden credit card interchange fees.

Currently, credit card interchange rates are set in secret, hidden from view and exclude merchants from the negotiating process. Raising interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards – as long as rising rates are kept top secret, consumers have no way of knowing the extra costs they are paying through higher prices. The Credit Card Fair Fee Act would introduce market transparency and open negotiations into the process.

About the survey

Penn, Schoen, and Berland LLC conducted telephone interviews with 605 likely voters nationally June 19, 2008 on behalf of UnfairCreditCardFees.com. The margin of error for national voters is +/- 3.98 at the 95% confidence level and larger for subgroups

Click here for the full results of the poll.

About UnfairCreditCardFees.com/Merchants Payments Coalition

The Merchants Payments Coalition (MPC), UnfairCreditCardFees.com, is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit http://www.unfaircreditcardfees.com.

Rally to Stop Skyrocketing MasterCard and Visa Fees on Gasoline

Click here for Media Advisory

NEWS RELEASE

Consumers and Merchants Tell Congress to Support the Credit Card Fair Fee Act

IRVINE, Calif.–(BUSINESS WIRE) Consumers and merchants alike will rally in Irvine on July 3^rd, Thursday morning at 7:30 – 9:00 am at the Chevron station at Jamboree and Barranca Parkway to call for independence from Visa and MasterCard’s hidden credit card fees that add another 8-10 cents a gallon on top of already skyrocketing gasoline prices.

Consumers and merchants will also be rallying in favor of the Credit Card Fair Fee Act which would end price-fixing by the credit card industry and help cut interchange fees. This bill would allow retailers to have a seat at the table to negotiate with the credit card industry for the terms and rates of the fees.

“Service station owners and consumers are paying record credit card fees as Visa, MasterCard, and their member banks reap the windfall from the 100% increase in the price of gasoline since 2007,” said Mitch Goldstone, event organizer and editor of WayTooHigh.com – The Credit Card Interchange Report. Goldstone is also president and CEO of 30 Minute Photos Etc. and ScanMyPhotos.com.

With $4-plus gasoline, gas customers typically shell out $2 or more to the credit card industry every time they fill up. Goldstone said, “Except for OPEC, nobody makes more money from skyrocketing gasoline prices on American consumers than Visa and MasterCard member banks – over $10 billion this year alone if gas prices stay above $4.”

“About two dollars of every $100 consumers spend in stores or buying gasoline goes directly to the credit card industry in the form of the interchange fee, the biggest credit card fee you’ve never heard of. Interchange has skyrocketed in recent years. Interchange is a hidden fee; the rates are set in secret by the credit card industry,” said Goldstone.

American businesses and consumers paid $42 billion in total interchange fees just in 2007 on all goods and services, far more than they paid in late fees, over-the-limit fees, annual fees, universal default, double cycle billing, exchange fees, and inactivity fees combined. Consumers not only pay more than they should through unfair fees but also through inflated retail prices, especially on gasoline.

The credit card industry has come under increased scrutiny from the public, consumer groups, the Federal Reserve, and Congress in the past three years for their unfair credit card practices, policies and fees. Interchange fees have been the subject of hearings three times in recent years under both the Republican and Democratic Congresses. Large number of Democrats and Republicans favor the Credit Card Fair Fee Act; it has bi-partisan support in both chambers of Congress.

 

 

Noise from the American Bankers Association

“ABA SAYS JUSTICE DEPARTMENT AND FTC LETTERS MAKE STRONG CASE AGAINST INTERCHANGE LEGISLATION.”

The American Bankers Association does it again. What a surprise that they issue a press release regarding a recent comment regarding the Credit Card Fair Fee Act.  What is purely stunning is that the bank trade association could even suggest that the consumer friendly legislation is “plainly anti-competitive and would violate fundamental antitrust principles.”  Have they no shame?

Visa and MasterCard with its 80% mammoth market power and well documented anti-competitive practices [See prior ~1200 posts below] is the reason millions of merchants are involved with our class-action litigation. 

Shortly, when you do an online dictionary search under the term “antitrust,” Visa and MasterCard will be used as the model for why the named worldwide defendants conspired to illegally fix prices and force merchants to pay supra-competitive Interchange fees.  Their actions are the reason we have the protections of the Sherman Antitrust Act.

While the Banks’ trade association’s president, Edward Yingling, said “this legislation will hurt competition and harm consumers, plain and simple,” he is wrong.  Competition is non-existent and millions of retailers and consumers worldwide are harmed every day due to the card associations unbridled greed.  

Did MasterCard and Visa just give American Express about $4.0 billion dollars to settle the prior antitrust suit [read more] because they are nice guys, or because they violated the law?  I look forward to an apology and recognition from the ABA that they were wrong.

Arguments and press releases like theirs is silly.  Ex: “The fact is the card payment system brings considerable benefits to all parties to a transaction,” said Yingling.  This might have been the same argument the railroads used in the 1800s when they forced farmers to either transport their goods via trains or let it rot.  That is also the reason the Sherman Antitrust Act was enacted.  Merchants like us [ScanMyPhotos.com] are forced to accept Visa and MasterCard or we will be out of business, just as the farmers were when they were forced to use the railroad network, as merchants are today forced to use the electronic payment network.  Differing networks, same violations.

If the ABA was representing consumers and retailers, rather than financial institutions, they would understand the facts, rather than parrot the replies from high-powered legal teams.

Stop Unfair Credit Card Fees – Merchants Payments Coalition

Tell Your Elected Representatives to Support HR 5546, The Credit Card Fair Fee Act

Credit card fees known as interchange are hidden in the cost of nearly everything consumers buy. In 2006 alone, American consumers paid over $36 billion in credit card interchange fees. Even consumers who don’t use plastic pay more through higher prices. Visa issuers collectively set credit card interchange fees in secret and MasterCard issuers separately do the same. The fees can’t be negotiated and are not adequately disclosed to merchants or consumers.

Tell your elected representatives to support HR 5546, The Credit Card Fair Fee Act which stops the price-fixing by the credit card industry and provides an open and transparent process to negotiate credit card interchange fees.

Send your message now.  Click here.

[Source: UnfairCreditCardFees.com]

 

“The Credit-Card Fee Market Isn’t Working” (via WSJ)

Click here to read the April 8th Wall Street Journal “Letter to the editor” from Rep. John Conyers (D., Mich.), Chairman House Judiciary Committee and Rep. Chris Cannon (R., Utah), Ranking Member House Judiciary Subcommittee on Commercial and Administrative Law.

—————————————————-

In the Journal’s March 29 editorial, “Credit-Card Wars,” you note that, “as consumers we’d like to see interchange fees come down too, but through market innovation and competition, not Congressional fiat.” We agree. That’s why we introduced the bipartisan Credit Card Fair Fee Act: It facilitates direct negotiations between merchants and the credit card industry on interchange fees.

This approach is necessary because of concerns about coordinated price fixing among issuers leading to less competition and higher rates. For example, Visa has increased the average interchange rate 17% (26 basis points) in recent years despite dramatically improved processing technology and rapidly rising card volume. As the Journal notes, “Economies of scale should be driving [interchange] fees down, as in most other service-fee industries.”

In fact, Americans pay nearly three times as much on average as Europeans in credit-card interchange fees for the same set of services — nearly 2% of every retail purchase. This amounts to nearly $36 billion imposed on consumers through higher retail prices. And the interchange fee is the largest credit-card fee of all — dwarfing credit-card late fees, over-the-limit fees, balance transfer fees, annual fees, inactivity fees, penalty interest fees, and even ATM bank fees.

Yet the editorial says the market will ride to the rescue and bring down excessive credit-card interchange fees. That is unlikely unless there are negotiations and proceedings as set forth in our legislation. In an economy in which, as the Journal notes, credit transactions are now king and cash has been dethroned, how can the vast majority of merchants turn down plastic from the two major credit-card companies, who control approximately 80% of the market?

We introduced the Credit Card Fair Fee Act to create an open and transparent environment that doesn’t exist today, one that will not only spur the major credit-card companies to negotiate fairly on interchange but also to provide the opening for lower-cost interchange credit-card brands. Our bill would lead to competitive market-based interchange rates and terms.

Rep. John Conyers (D., Mich.)
Chairman
House Judiciary Committee

Rep. Chris Cannon (R., Utah)
Ranking Member
House Judiciary Subcommittee on Commercial and Administrative Law
Washington

“Retailers Welcome Antitrust Legislation Addressing $40 Billion in Hidden Credit Card Fees” (Via NRF News Release)

[Via Businesswire, March 6, 2008]

WASHINGTON–The National Retail Federation today welcomed the introduction of landmark antitrust legislation that would address hidden MasterCard and Visa fees that cost merchants and their customers more than $40 billion a year.

“This legislation would use the nation’s antitrust laws to rein in the greed of the credit card companies,” NRF Senior Vice President Mallory Duncan said. “With the rapidly increasing use of plastic, credit card companies and their banks are seeing a windfall that is costing U.S. consumers tens of billions of dollars each year. These are fees that most consumers don’t even know they’re paying because Visa, MasterCard have tried to keep them secret. The introduction of this legislation marks the beginning of the end of credit card company rip-offs.”

“Rather than allowing these fees to continue to be set in secret and imposed on a take it or leave it basis, this legislation would require negotiations and allow retailers to seek fair terms and conditions that will ultimately mean a better deal for consumers,” Duncan said. “Consumers are already angry at the way they’ve been treated by credit card companies, and this bill is an important step toward making credit card companies treat both merchants and their customers with respect.”

The Credit Card Fair Fee Act was introduced today by House Judiciary Committee Chairman John Conyers, D-Mich. The bill is the first attempt by Congress to address credit card interchange fees, and is the outcome of a hearing held in July 2007 where Duncan, testifying on behalf of NRF and the Merchants Payments Coalition, argued that interchange practices violate federal antitrust law.

Averaging close to 2 percent, interchange is a fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, an increase of 17 percent over the previous year and 150 percent since 2001.

Interchange is largely unknown to most consumers because Visa and MasterCard don’t disclose the fee on monthly statements and effectively keep merchants from disclosing it on receipts. But Visa and MasterCard effectively require merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. The fees amount to about $350 per household each year.

The Conyers bill would require credit card systems possessing “substantial market power” to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would be required to submit to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

The arbitration proceedings would take place with a limited 60-day discovery period and other statutory deadlines, and the judges would be required to apply a market standard reflecting a perfectly competitive system where neither side had market power. Terms and conditions set by the panel would be in effect for three years, at which time the process would repeat itself. Both sides would receive limited immunity from antitrust laws in order to participate in the process.

The legislation requires that terms and conditions set under the process be available to any merchant regardless of size, industry or location. Individual merchants or groups of merchants would remain free to negotiate voluntary arrangements with credit card companies and their banks.

NRF is leading retailers’ fight against soaring interchange costs. During last summer’s testimony before the Judiciary Committee’s Antitrust Task Force, Duncan explained to lawmakers how Visa and its member banks come together to set interchange rates that all banks agree to charge regardless of which bank’s name is on a card. MasterCard follows a different procedure that also results in all its banks agreeing to charge the same. In either case, the two card associations each operate as illegal price-fixing cartels in violation of antitrust law, he said. With Visa and MasterCard together controlling at more than 80 percent of credit card purchase volume, retailers cannot afford to refuse the cards, he said.

The National Retail Federation is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry’s key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees – about one in five American workers – and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com