Fed Wont Referee InterchangeWars
WASHINGTON - (04/20/06) The Federal Reserve will notintervene in the escalating battle over interchange fees betweenthe credit card associations and merchants, a top Fed official saidhere Wednesday. In fact, the Central Bank says it doesnteven have the power to intervene and set rates, as some groups havesuggested, according to Stuart Weiner, a top payments systemofficial at the Kansas City Fed. The Federal Reserve doesnot currently have the authority to regulate credit card and debitcard interchange fees, said Weiner during CUNAsannual Payments System Conference. The Fed was responding torequests by consumer groups and members of Congress that it use itsauthority over electronic payments to set and regulate interchangefees, an increasingly acrimonious process between Visa USA andMasterCard International, which control the payments system, andthe millions of merchants that pay fees on customer transactions.The merchants have filed several antitrust suits against the twocard companies, which are dominated by the big banks, claiming,among other things, that the two use their market clout to fix theinterchange fees schedule. Getting squeezed in the conflict by thetwo commercial giants are credit unions, observers at theconference said. At stake is no small prize: $30 billion ininterchange revenue a year. Some lawmakers had suggested that theFed step in and settle the dispute between the card companies andmerchants by regulating interchange fees, like they recently did inAustralia.