National Retail Federation Video: Battling Credit Card SwipeFee Monopoly

April 26, 2010

Repost: National Retail Federation Senior Vice President and General Counsel Mallory Duncan Duncan discusses his October 8, 2009, testimony before the House Financial Services Committee and explains how the credit card industry is in an “arms race” to raise “swipe” fees.

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NRF Urges Dodd to Address Swipe Fees in Bill (via CSP)

March 16, 2010

WASHINGTON — The National Retail Federation (NRF) expressed disappointment that a wide-ranging financial services reform bill unveiled earlier this week by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) does not address the $48 billion in credit-card swipe fees paid by merchants and their customers each year.

“Chairman Dodd’s bill takes many steps to curb the excesses of the financial services industry, but the failure to address swipe fees is a glaring omission,” NRF senior vice president and general counsel Mallory Duncan said. “These fees drive up prices for the average family by hundreds of dollars every year and depress the ability of main street merchants to thrive and grow.”

“Financial services reform isn’t complete without swipe fee reform,” Duncan said. “Chairman Dodd has acknowledged the impact of these fees on consumers in the past, and we hope to see them addressed in the final version of this legislation.”

Visa and MasterCard banks charge merchants a fee called interchange each time one of their cards is swiped to pay for a purchase. With the fee averaging about 2%, “swipe fee” collections totaled $48 billion in 2008, triple the $16 billion collected when NRF began tracking the fees in 2001. Visa and MasterCard rules effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of merchandise and making discounts for cash, checks or cheaper forms of plastic difficult. As a result, the average household paid an estimated $427 in higher prices in 2008, up from $159 in 2001.

Dodd included a provision in last year’s Credit CARD Act requiring the Government Accountability Office (GAO) to conduct a study of interchange fees. The study concluded that credit-card swipe fees have been increasing despite card industry claims that they have remained steady, that the fees drive up prices for consumers and that consumers could see lower prices if they were reduced. Dodd has also said that he would consider legislation barring Visa and MasterCard placing restrictions on merchants’ ability to offer a discount for cheaper forms of payment such as cash, checks and debit cards.

Three major bills that would address swipe fees are pending in Congress. H.R. 2695, the Credit Card Fair Fee Act, sponsored by Judiciary Committee Chairman John Conyers (D-Mich.) and Senate companion bill S. 1212, sponsored by Majority Whip Richard Durbin (D-Ill.) would require Visa and MasterCard banks to negotiate with merchants over the fees rather than continuing to impose them on a unilateral basis. H.R. 2382, the Credit Card Interchange Act, sponsored by Representative Peter Welch (D-Vt.) would require increased transparency, give the Federal Trade Commission (FTC) authority to prohibit interchange practices that violate consumer protection or anticompetition laws and make cash discounts easier.

NRF 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, convenience stores, 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 establishments, more than 24 million employees—about one in five American workers—and 2008 sales of $4.6 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations.

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NRF Testifies that Credit Card Companies are in an ‘Arms Race’ to Increase ‘Swipe Fees’ Paid by Merchants and Consumers (NRF via BW)

October 8, 2009

WASHINGTON–(BUSINESS WIRE)–The National Retail Federation today warned Congress that credit card companies are in an “arms race” to increase the $48 billion in “swipe” fees paid by merchants and their customers each year, and urged passage of legislation that would put rules governing the fees under the jurisdiction of the Federal Trade Commission.

“There is an arms race to create cards with higher fees and more bells and whistles,” NRF Senior Vice President and General Counsel Mallory Duncan said. “The market checks that would normally exist to curb this escalation in fees are diminished because the card companies know that every merchant is required to take these expensive new cards or lose their ability to accept any cards. The Welch-Shuster bill would allow the most expensive cards to be refused, and while we expect that few merchants would actually refuse cards if this were passed, it would make the card companies think before they reflexively introduce cards with higher fees.”

“Most consumers don’t know it, but every time they swipe a rewards card with its miles and concierge services, they are driving up the price of everything they buy even higher,” Duncan said. “This particularly hurts less-privileged Americans who don’t have rewards cards or can’t get cards at all because Visa and MasterCard rules effectively require that everyone pay the credit card price even if they are paying with cash, check, debit card or even food stamps.”

“There is no regulator that reviews whether credit card company rules are unfair, deceptive or anticompetitive,” Duncan said. “This legislation would deal with this absence of oversight by directing the Federal Trade Commission to review card company rules and prohibit practices that meet that description. That is the minimum level of protection that this market needs to begin to function properly.”

Duncan testified before the House Financial Services Committee today during a hearing on H.R. 2382, the Credit Card Interchange Act of 2009, sponsored by Representative Peter Welch, D-Vt., and co-sponsored by Representative Bill Shuster, R-Pa. The bill would require credit card companies to disclose interchange rates, terms and conditions, and give the Federal Trade Commission authority to review interchange and prohibit any practices that violate consumer protection or anti-competition laws. Merchants would be allowed to give cash discounts and set minimum credit card purchase amounts, and could choose which credit cards to accept.

Interchange is a fee averaging 2 percent that Visa and MasterCard banks charge merchants each time one of their credit cards is swiped to pay for a purchase. But Duncan explained to the committee that the rate can range from as low as about 1.5 percent for an ordinary card to 3 percent or more for “gold” and “platinum” cards that offer rewards like travel miles or concierge services. In recent years, card companies have created an escalating series of rewards cards – each carrying more rewards but also higher fees – and “upgraded” millions of consumers. The higher-fee cards can’t be turned down by merchants because of Visa and MasterCard’s “Honor All Cards” rule. The practice, along with marketing that has pushed the use of plastic and introduced cards into new areas like taxis, has helped triple interchange revenue from the $16 billion collected when NRF began tracking the fees in 2001 to the $48 billion collected last year.

Visa and MasterCard rules effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of merchandise and making cash discounts difficult. The result is that the average household paid an estimated $427 in higher prices last year, up from $159 in 2001.

Merchants have long sought to offer cash discounts, but Duncan said an amendment to this spring’s credit card reform bill that would have blocked credit card companies from interfering with that ability was met with “howls of protest’ from the card industry and was not included in the final measure.

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 establishments, more than 24 million employees – about one in five American workers – and 2008 sales of $4.6 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.


NRF Urges Senate to Pass Amendment to Credit Card Reform Bill Making Cash Discounts Easier

May 12, 2009
NRF Urges Senate to Pass Amendment to Credit Card Reform Bill Making Cash Discounts Easier

WASHINGTON, May 12, 2009 – The National Retail Federation today urged the Senate to approve an amendment that would make it easier for retailers to offer discounts to customers who use cash or other low-cost forms of payment rather than credit cards that carry increasingly high processing fees.

“Retailers should be able to offer discounts to their customers in any legal way they choose without interference from the credit card companies,” NRF Senior Vice President for Government Relations Steve Pfister said. “By reinforcing retailers’ ability to offer discounts, the Durbin-Bond amendment will directly help reduce the prices that consumers pay for goods and services.”

Pfister’s comments came in a letter to members of the Senate, which is expected to vote this week on legislation that would block a number of abusive credit card industry practices such as applying interest rate increases retroactively to existing balances or “double cycle” billing, where interest charges are computed on outstanding balances from more than one billing cycle.

Senate Majority Whip Richard Durbin, D-Ill., and Senator Christopher “Kit” Bond, R-Mo., plan to offer an amendment to the legislation that would make it easier for merchants to offer a discount to customers who use low-cost forms of payment.

Current federal law allows merchants to offer a discount in such cases, but complicated credit card company rules make it extremely difficult to do so in practice. The Durbin-Bond amendment would add debit cards to cash and checks on the list of payments for which a discount can be offered, and would prohibit credit card companies from penalizing merchants for offering a discount, for the way in which they display discounts or for directing customers toward a discount payment option.

The legislation would also direct the Federal Reserve to gather and publish information on credit card interchange fees, other credit card fees and rules governing them.

“These rules are essentially hidden today,” Pfister said. “Both retailers and the public have a right to more complete information given the billions of dollars involved and the impact these fees have on the cost of everyday goods.”

The amendment is aimed at credit card interchange, a fee averaging close to 2 percent that Visa and MasterCard banks charge merchants to process the transaction each time a credit card is used to pay for a purchase. Visa and MasterCard rules effectively require the fees to be built into the price of merchandise, driving up costs for all consumers regardless of whether they pay by cash, check or plastic. The fees totaled $48 billion in 2008 and cost the average household $427, according to NRF estimates. Both numbers are three times the levels seen when NRF began tracking interchange in 2001.

The interchange fee varies from as little as about 1.5 percent to as high as about 3 percent, with “premium” cards offering rewards programs to the users carrying the highest fees. In addition to adding debit cards to the list of payments for which discounts can be offered, the Durbin-Bond amendment would allow merchants to offer discounts to customers who use low-fee credit cards rather than high-fee cards.

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 establishments, more than 24 million employees – about one in five American workers – and 2008 sales of $4.6 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com

[source: NRF]



“Retailers: Card Fees Too High” (via Times Union)

March 22, 2008

Click here to read the March 22 article by Alan Wechsler in the Times Union.  

[Of note is that the bank’s along with Visa and MasterCard’s proxy, Trish Wexler at their Electronic Payments Coalition advocacy group  explained in the article that “Credit card companies say government has no right to get involved.”  This probably was the same argument the robber barons voiced in the 1800s when the railroad owners forced farmers to pay whatever they demanded to transport their goods to market. Interchange fees are just as antiquated and were designed a generation ago to process four-party payments over the Visa and MasterCard network, back when we merchants used manual credit card imprinters and carbon copy receipts.  As for Ms. Wexler, this is why we have the Sherman Antitrust Act, because Washington listened.  The goal of WayTooHigh.com – The Credit Card Interchange Report is to derail the banks’ arrogance.] 

Excerpt:

  • “There’s growing retailer resentment over the fees Visa and MasterCard charge for using their cards. More than 40 years after the cards were first introduced, nine states, including New York, along with the federal government, are pushing for laws to control the power credit card companies have over businesses.”
  • “It’s really out of control,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation, a trade group in Washington, D.C. “The rates keep going up, the terms are horrendous and it’s a cost that retailers and their customers have to bear.”

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

March 6, 2008

[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 nations 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 dont even know theyre 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 theyve 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 dont 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 summers testimony before the Judiciary Committees 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 banks 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