Trade Groups Hail House Committee Approval of Credit Card Interchange Act

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Trade Groups Hail House Committee Approval of Credit Card Interchange Act

Retail trade associations were full of praise for the House Judiciary Committee's bipartisan 19-16 vote in favor of the Credit Card Fair Fee Act of 2008 (H.R. 5546) yesterday, which is clearing the way for a full House vote.

"It forces the credit card companies to actually negotiate the fees," a jubilant Tim Hammonds, c.e.o. of the Food Marketing Institute, told Progressive Grocer, adding that in the past Visa and MasterCard, which he characterized as "effectively a cartel controlling the market," set the fees themselves, in private, with no input from retailers.

Added John J. Motley III, FMI's s.v.p. of government and public affairs, "This vote is a major milestone in our long-standing campaign for a fair, competitive and transparent credit card interchange fee system."

The legislation would enable retailers to negotiate transaction fees with credit card companies controlling at least 20 percent of the market -- meaning Visa and MasterCard. The negotiators would decide which costs the fees should cover, such as computer processing, communications and system maintenance, and give financial institutions a reasonable rate of return. The U.S. Justice Department Antitrust Division would supervise such negotiations.

Currently, retailers can negotiate only a small portion of the fees with their banks.

The National Grocers Association also applauded the vote, noting that under the bill "the merchant community receives limited anti-trust exemption during the negotiating process to ensure that retailers and consumers are provided a level playing field against the banks and card companies."

Both organizations are members of the Merchants Payments Coalition, a group of nearly 100 operators of supermarkets, drug stores, convenience stores, fuel stations, online merchants, and other businesses that accept debit and credit cards. The MPC, whose membership represents about 2.7 million stores with about 50 million employees, wants interchange fees to be based on actual transaction costs.

FMI's Hammonds also expressed optimism about the ultimate passage of the legislation in Congress. "Two years ago, no one in the House or Senate had ever heard of interchange fees," he noted A massive educational initiative by FMI changed that.

Therefore, to get to the point of a "landmark" House committee vote represents a "huge victory" for the retail community, he added, attributing the relatively rapid progress to the fact that interchange fees have been "the No. 1 priority of the board of directors on legislative issues."

Credit card companies charge an interchange fee of about 2 percent on every credit card transaction. The total cost of such fees has tripled since the start of the decade, from $16.6 billion in 2001 to a projected $48.8 billion this year, according to the MPC and data from The Nilson Report. Last year Americans paid $42 billion in interchange fees.

House Judiciary Committee Chairman John Conyers (D-MI) and committee member Rep. Chris Cannon (R-UT) sponsored the House bill, while Sen. Richard Durbin (D-IL) introduced the Senate companion bill (S. 3086), along with co-sponsor Kit Bond (R-MO).