NRF Supports Credit Card Swipe Fee Bill

May 5, 2010  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on May 6, 2010

The National Retail Federation is urging the House Judiciary Committee to approve legislation that would require Visa and MasterCard banks to negotiate over the terms and conditions associated with the $48 billion in credit card swipe fees paid by merchants and their customers each year.

"The fact that you€™re seeing this issue being widely discussed both here in Washington and in the states shows that people have finally come to understand the huge financial impact these fees have on consumers and the economy," NRF Senior Vice President and General Counsel Mallory Duncan said. "It has become clear to lawmakers that these fees drive up consumer prices. We can't afford to have this much money diverted into banking profits at a time when Main Street businesses and working families are struggling to recover from the economic downturn."

NRF testimony before the committee last week "makes it clear that practices in setting swipe fees have violated federal antitrust law, and that most of these fees go to the nation€™s largest banks, not local lending institutions," Duncan said. "If big banks can be required to negotiate with merchants the same as any other vendor offering a service, we can bring these fees down to a level that more fairly reflects the value of the service provided."

Sponsored by Chairman John Conyers, D-Mich., and co-sponsored by Representative Bill Shuster, R-Pa., H.R. 2695, or the Credit Card Fair Fee Act, would require credit card systems possessing "substantial market power" to negotiate with merchants to reach a voluntary agreement on credit and debit card terms and conditions. Under current practice, Visa and MasterCard--the only two card systems that meet the definition of holding "substantial market power"--have always refused to negotiate over the fees, instead unilaterally imposing them on merchants.

The Vermont legislature is considering a bill that would bar card companies from interfering in retailers' ability to set minimum credit card purchases or to offer a discount for cash, checks, debit cards or credit cards with lower-than-normal swipe fees. A number of other states are also considering swipe fee-related legislation.

Officially known as interchange, swipe fees average about 2 percent of the purchase price and are charged to merchants by Visa and MasterCard banks each time one of their cards is swiped to pay for a purchase. Collections totaled $48 billion nationwide in 2008, triple the $16 billion collected when NRF began tracking the fees in 2001.

While often dismissed by the card industry as a business-to-business matter, NRF holds that 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; and that nationwide, the average household paid an estimated $427 in higher prices in 2008, up from $159 in 2001.