NRF welcomes new credit card legislation
WASHINGTON The National Retail Federation welcomed the introduction of legislation that would require Visa and MasterCard to negotiate over hidden credit card processing fees that cost the average household more than $400 a year.
“Between the momentum built up since this bill passed the Judiciary Committee last year, the intense scrutiny of the financial services industry seen during the current economic crisis, and the credit card reform law signed last month, we think the perfect storm exists for Congress to do something about these unjustified hidden fees,” NRF SVP and general counsel Mallory Duncan said. “In the middle of one of the worst recessions seen in decades, consumers can’t continue to pay artificially inflated prices just so the credit card industry can skim profits off the top. It’s time for these fees to be brought under control.”
House Judiciary Committee Chairman John Conyers, D-Mich., today introduced H.R. 2695, the Credit Card Fair Fee Act of 2009. The measure is similar to the version of the bill that was approved by the committee in July 2008 and would require Visa and MasterCard banks to negotiate with merchants on “interchange” fees that are currently imposed on merchants on a take-it-or-leave-it basis.
Interchange is a fee averaging close to 2 percent that Visa and MasterCard banks charge merchants every time a credit card is used to pay for a transaction. Visa and MasterCard 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. Interchange is largely unknown to most consumers because Visa and MasterCard keep merchants from disclosing it on receipts and don’t disclose the fees on consumers’ monthly statements.
Interchange collections totaled $48 billion in 2008, up from $16.6 billion when NRF started tracking the fees in 2001. The higher prices that result from the fees cost the average household an estimated $427 last year, up from $159 in 2001.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 signed into law May 22 by President Obama includes a provision requiring the Government Accountability Office to conduct a study of how interchange drives up retail prices, why the card industry refuses to disclose the fees to consumers and how card companies keep retailers from offering cash discounts, among other issues.
“We expect the GAO to do a serious study that will reveal the negative impact of interchange on the U.S. economy,” Duncan said. “The debate over interchange that occurred as Congress considered the credit card reform bill helped shine a spotlight on this issue and make more members of Congress and the public aware of how much the card industry is making off these fees. Congress can’t claim to have fixed credit cards without addressing interchange, but they are clearly on the path to finishing the job.”