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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“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



“Fees Fueling Frustration for Region’s Gas Retailers” (Buffalo Business First)

December 7, 2007

Click here to view article. 

Abstract:

What’s more frustrating, experts claim, has been the inability to get straight answers from credit card companies such as MasterCard and Visa about how such fees are structured.

According to Jeffrey Lenard, spokesman for the National Association of Convenience Stores, approximately 70 percent of all gas purchases were made with a credit or debit card last year.

Lenard cited NACS data, which indicates profits for gas stations and convenience stores in 2006 totaled $4.8 billion.   Credit card companies made more at gas stations and convenient stores than the stores did themselves,” Lenard said.

“The reason for interchange fees, we’re told, is to pay for the technology infrastructure and fraud protection. The U.S. is arguably the best in the world in both these categories. To say that interchange pays for those things is unfathomable to me.”

The amount credit card companies made processing those transactions: $6.6 billion.


CBS “60 Minutes” Program Takes on Credit Cards

November 27, 2007

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.