National Retail Federation Video: Battling Credit Card SwipeFee Monopoly

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.

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

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)

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

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]

Assault on Visa and MasterCard’s Merchant Fees Escalates in the WSJ

The magnifying attention to what we assert is illegal price-fixing by Visa, MasterCard and its member banks is gaining concentrated global attention.

After a recent Wall Street Journal commentary (Credit-Card Wars,” Review & Outlook, March 29) that was favorable to one of the publication’s largest advertising categories – financial services – we anticipated a monstrously loud examination from retailers and the public. Today it happened.

There were four letters published in Thursday’s WSJ “Letters to the Editor” section.  Our guess is that many more did not make the cut either, including ours (see below).  Then again, we already had one published on Jan 10th. See link.  For an overview of today’s response and our letters, see below.

• Merchants Must Submit To MasterCard’s Power
  WSJ, January 10, 2008; Page A13

  The European Union has found, again, that interchange fees charged by MasterCard to merchants are fixed at anticompetitive levels. Instead of recognizing that the nearly $40 billion annual hidden tax on merchants and consumers is based on illegal price-fixing, Joshua Peirez of MasterCard Worldwide hauls out the usual replies (“EU Killing of Interchange Fees Won’t Help Customers,” Letters, Dec. 28).

  The fact is that consumers, the marketplace and technology, not interchange fees, are what force innovations within the electronic-payment network. The actual cost of an electronic payment is a tiny fraction of the total fees collected, yet Mr. Peirez suggests that “interchange fees are necessary to fairly share the cost of an electronic payment system.”

  Merchants are unable to pay a fair price for using MasterCard’s (and Visa’s) payment network; we are all forced to submit to their market power and their member banks’ ability to collectively fix interchange fees at noncompetitive levels. MasterCard’s long history of anticompetitive price-fixing corrupts its understanding of Economics 101, where the marketplace controls competition, not a board of directors who stand accused of illegal price-fixing.

  Mitch Goldstone
  President and Chief Executive
  ScanMyPhotos.com
  Irvine, Calif.

  (Mr. Goldstone is the lead plaintiff in merchant-interchange litigation against Visa, MasterCard and leading member banks.)
  

“Are Credit-Card Fees Fair, to Whom, and How Best to Set Them?”  LETTERS/EXCERPT:

• Interchange fees in the U.S. are far higher than those in other western countries. Unfortunately, a market solution is not currently possible because of the credit-card network rules that insulate interchange fees from market discipline. Some credit cards (those with lots of rewards points) cost merchants twice as much as others.

  In a normal, free market, we would expect to see these cards priced differently. Credit-card networks, however, forbid merchants to charge more for credit cards than for other, cheaper payment methods, to charge different prices for different card brands or cards within a brand, to accept only certain cards within a brand, or to accept cards only at certain locations and for certain transactions.

  Innovation and competition cannot push down interchange rates until the card networks’ artificial constraints on the market are banned.

  Adam J. Levitin
  Associate Professor of Law
  Georgetown University Law Center
  Washington
  ————————————————-

• Your editorial comes to the conclusion that soaring Visa and MasterCard “interchange” fees that cost merchants and consumers more than $35 billion each year are no big deal because “retailers have options to avoid the fees.”

  You say merchants can offer a cash discount. In fact, Visa and MasterCard rules make it almost impossible for anyone but gas stations to post both cash and credit prices. And even if they didn’t, the card companies’ systems don’t tell the merchant how much interchange is being charged at the time of purchase, making it impossible to calculate how much of a discount to offer.

  You also claim that large chains negotiate lower fees. There are lower-rate categories for a few large merchants based on dollar volume, but Visa and MasterCard refuse to negotiate these rates and impose them on a take-it-or-leave-it basis just as they do for smaller merchants.

  Finally, with Visa and MasterCard controlling more than 80% of the market, the question of competition isn’t about other cards or PayPal. The issue is that the thousands of banks issuing Visa and MasterCard cards won’t compete to lower interchange rates. Instead, they have historically come together and agreed to all charge the same high fee for each specific type of card. As we have testified before the House and Senate Judiciary Committees, that is a blatant violation of federal antitrust law.

  Visa/MasterCard rules effectively require that billions of dollars in interchange costs be passed along to consumers — a hidden credit-card fee of more than $350 a year — yet most families don’t even realize their pockets are being picked. During the shaky financial times you note, what better way to help the economy than to bring the greed of the card companies under control?

  Tracy Mullin
  President and CEO
  National Retail Federation
  Washington
  ——————————————–

• One important point to merchants that was not developed in the article: It is not the “basic” set of fees for accepting charge cards that many of us take issue with. What aggravates so many merchants and service providers is the fee surcharges that are unilaterally imposed upon merchants for accepting certain types of credit cards most often associated with the multitude of rewards programs so widely advertised.

  How do the likes of Capital One so generously offer the merchandise, discounts, and cash back without losing money? They attach a surcharge to these cards over and above what the merchant expects to pay for accepting these credit cards. The merchant must pay the extra fee. Merchants have no control over the surcharge amount which they are charged, so the card issuers can be ever more generous to the card holder at the expense of the merchant.

  Bill Gardella, Jr.
  Norwalk, Conn.
  ——————————————-

• Credit-card fees are an ever growing expense for all retailers. Credit-card fraud is rampant. Consumers are now starting to default on their credit-card debt the same way they’ve defaulted on mortgages. Your argument that if it ain’t broke, don’t fix it, doesn’t hold here. Would you have said the same thing about subprime mortgages two years ago? Government should be monitoring this ever expensive and important industry.

  Stuart Burke
  Hopkinton, Mass.

Our prevous letter to the WSJ didn’t make the cut, but, here’s a copy in response to a WSJ article.

Dear Editor (drafted, Feb 29), There’s more to Eric Felten’s “the burden of gratuitous gratuities” (Weekend Journal, Feb 29) than just that flaunty tipping jar at Starbucks.  Most consumers don’t know that when they use a credit or debit card to fund their daily fix of java, it adds to a very hefty tip for Visa, MasterCard and its thousands of member banks that make up their cartel.  As Starbucks attunes away from its financial miscues, a giant cost savings would be to return to cash to save consumers from the merchant interchange fees.  Each year, electronic payment interchange fees – including those micro-payments of a buck or two bestow nearly $40 billion in cash to the banks.  These rich fees were once cost-based and designed for clearing those manual credit card imprinter carbon copy transactions on the Visa and MasterCard network.  Today, the lack of competition (Visa and MasterCard own nearly 80% of the market) and the unbridled collusion forces the question: why are these obsolete fees still in force? 

Technology and innovations enable instant, automated and efficient settlements that no longer warrant these tips to the banks

Mitch Goldstone
Co-Editor – WayTooHigh.com – The Credit Card Interchange Report Excerpts from The Wall Street Journal, April 3, 2008

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

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.”

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“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

“Retailers Say U.S. Should Follow European Ruling Ordering MasterCard to Withdraw Hidden Credit Card Fee ” (via NRF Businesswire release)

[Businesswire, Dec 19] The National Retail Federation today welcomed a ruling by the European Commission that hidden fees currently charged by MasterCard to process credit card transactions in Europe – similar to those that cost U.S. shoppers $40 billion annually – drive up costs for consumers in violation of EC rules and must be withdrawn within six months.

“European authorities say MasterCard is double dipping in Europe, and that’s exactly what we think both MasterCard and Visa are doing here in the U.S.,” NRF Senior Vice President and General Counsel Mallory Duncan said. “Visa and MasterCard are charging billions of dollars directly to consumers for all the fees that show up on their monthly statements, then they turn around and charge billions more from the hidden credit card fees they force merchants to include in the price of merchandise.”

“These fees drive up the cost of merchandise for shoppers while delivering little if any benefit commensurate with the billions charged,” Duncan said. “It’s time for this to stop, and authorities here in the United States should take the European ruling as a signal that it’s time to bring the same relief to U.S. consumers.”

The European Commission ruled today that so-called “interchange” fees charged by MasterCard and its banks violate EC Treaty rules on restrictive business practices and “inflated the cost of card acceptance by retailers without leading to proven efficiencies.” The commission ordered MasterCard to withdraw the fees within six months or face fines equivalent to 3.5 percent of global revenues.

The commission said the fees are “not illegal as such” and stopped short of saying MasterCard could not charge any interchange fee at all. But any replacement system of fees, even if lower, would be allowed under EC rules only if MasterCard could show that it “contributes to technical and economic progress and benefits consumers.”

EC Competition Commissioner Neelie Kroes said the fees drive up costs for consumers as well as retailers.

“Consumers foot the bill as they risk paying twice for payment cards: once through annual fees to their bank and a second time through inflated retail prices,” Kroes said in releasing the ruling. “The commission will accept these fees only where they are clearly fostering innovation to the benefit of all users.”

Averaging close to 2 percent in the United States, 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 more than $36 billion in interchange fees last year, up 17 percent from 2005 and 117 percent since 2001. This year, the amount is expected to top $40 billion, or about $350 per household. Interchange is largely unknown to most consumers because Visa and MasterCard don’t disclose the fee on monthly statements and prohibit merchants from disclosing it on receipts.

MasterCard interchange rates for cross-border transactions in Europe currently range from 0.8 percent to 1.2 percent of each transaction. Visa was not addressed in today’s ruling but reached an agreement with the EC in 2002 that restricts its fees – previously averaging 1.1 percent – to a maximum of 0.7 percent. That agreement ends at the end of 2007, and the EC said today that beginning in 2008 Visa will be “responsible to ensure that its system is in full compliance with EU competition rules.”

NRF is leading retailers’ fight against soaring interchange costs in the United States, and Duncan testified before the House Judiciary Committee’s Antitrust Task Force in July that collusion between banks when setting the fees has violated U.S. antitrust law. The hearing was the second time Congress has looked at interchange practices in the past two years following a Senate Judiciary hearing on possible antitrust violations in July 2006. In addition, approximately 50 federal antitrust lawsuits against Visa, MasterCard and their member banks have been consolidated in U.S. District Court in New York and are awaiting action.

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 2006 sales of $4.7 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. http://www.nrf.com

“Merchants Applaud Senate Scrutiny of Credit Card Fees” (MPC)

According to their Dec 4 press release, the Merchants Payments Coalition is encouraged by a congressional hearing calling into question unfair credit card practices.  Today’s hearing, held by the Senate Permanent Subcommittee on Investigations, is among several held this year that are scrutinizing the unfair practices imposed on consumers and merchants by credit card companies.

“This hearing is another example of how serious the issue of credit card abusive practices is for everyone,” said MPC Chairman Mallory Duncan, senior vice president and general counsel at the National Retail Federation. “The credit card industry has profited from outrageous fees, and congressional attention is beginning to shed some light on a broken system.”

One of the most outrageous fees most people have never heard of is the “interchange” fee, a percentage of each transaction that Visa and MasterCard along with their member banks collect from retailers every time a credit or debit card is used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent per transaction.

Unlike other credit card fees, credit card companies don’t show interchange on monthly statements while their rules make it virtually impossible to show it on receipts and make cash discounts very difficult to offer. Instead, stores are effectively required to include the fee in the price of merchandise, meaning higher prices for all customers, even those who pay by cash or check. The hidden fee cost consumers and merchants $36 billion last year and is expected to top $40 billion this year.

Earlier this year, the Senate Banking Committee held a hearing on the billing, marketing and disclosure practices of the credit card industry. In addition, Duncan testified on behalf of the MPC during a July hearing on credit card interchange held by the House Judiciary Committee’s Antitrust Task Force.  Duncan argued that Visa and MasterCard practices in setting interchange rates have constituted a violation of federal antitrust laws.  MPC advocates a payment system that is transparent and open to competition.

CBS “60 Minutes” Program Takes on Credit Cards

Click here to view the CBS “60 Minutes” Credit Card profile [originally aired Sunday, Nov 25]. 

The real “high tech heist” is perpetrated by Visa, MasterCard and its thousands of member banks who are charging $40 billion dollar each year in hidden fees.  The card associations will challenge our argument by explaining their fees are transparent. But, they are wrong. 

How wrong? 

Click on the links for Visa and MasterCard below and see if you can figure out what merchants are charged by Visa USA and MasterCard from their website’s fee schedules, but make sure you have lots of coffee and time…

The National Retail Federation was also interviewed for this “60 Minutes” segment.