WASHINGTON – Credit unions are lobbying against a congressional bill that would open the process of setting interchange fees on credit and debit cards, saying the proposal would amount to government caps on fees.
The bill, to be discussed at a hearing this morning before the House Judiciary Committee, would allow large merchants – such as Wal-Mart – to negotiate their own fees with Visa and MasterCard. A three-member government panel then would approve the negotiated fees. The fees, an estimated $36 billion a year, currently are set by Visa and MasterCard, which control 80% of the payments card market.
The congressional sponsors of the bill deny it would regulate fees, but credit union representatives say the government panel would have the authority to set fees, thereby amounting to government regulation. “The argument that it is a negotiation is somewhat of a red herring,” said Dillon Shea, a senior lobbyist for NAFCU.
Chartway FCU’s chief operating officer John Blum, representing NAFCU, is expected to tell lawmakers at today’s hearing the bill could have dire consequences for smaller institutions – such as credit unions – which could get caught between the largest banks and merchants in the fee-setting process. Blum is expected to testify as to the importance of interchange fees to credit unions to offset the costs of providing credit and debit card programs to attract consumer business.
Interchange fees have become a major source of revenue for credit unions, providing an estimated $3 billion last year. Chartway, for example, earned almost $3.4 million in interchange fees last year, an average of 24 cents on 14 million transactions.
The fees are paid by consumers on every card transaction. The fees then are divided among the consumer’s credit union or bank, the merchant acquirer, and the card companies, mostly Visa and MasterCard, which are controlled by the banks and credit unions.
NAFCU and CUNA are working with the American Bankers Association, Independent Community Bankers of America, Visa and MasterCard as part of an Electronic Payments Coalition to defeat the bill.
