ARLINGTON, Va. - NAFCU said last week it will oppose a bill that would allow merchants to negotiate the interchange fees they pay to bank and credit union merchant acquires, as part of the agreement for participating in card networks.
The bill would let retailers and other businesses join together to negotiate for a better interchange fee, the fees paid by a merchant’s bank or credit union to the cardholder’s bank as part of a Visa or MasterCard transaction. American Express, Discover and other credit cards use a different model.
Retailers, including supermarkets, department stores, and gas stations that accept Visa or MasterCard claim the fees – which amounted to more than $30 billion last year–are spiraling out of control. But the banks and credit unions and the card companies say the fees are just part of the cost of doing business and the ever-evolving age of electronic commerce.
“Credit card interchange fees, like labor, advertising or the price of real estate, are a cost of doing business,” said Fred Becker, the president of NAFCU. “Just like any other business expense, merchants build that cost into the final price of their goods and services. This bill will only decrease consumer credit availability and increase the cost of credit.”
“Those advocating limits on interchange fees base their arguments–incorrectly–on the theory that interchange fees are out of control,” said Becker. “The price per transaction, however, has remained relatively stable. The total interchange fee income has only increased over the last several years because more people are using credit and debit cards.”
NAFCU’s position is the same adopted by the Electronic Payments Coalition, a 54-member group that includes Visa, MasterCard, Bank of America and various financial trade lobbying groups.
But merchants, especially small retailers, argued during congressional hearings, that rising interchange costs are making it difficult for them to compete, especially since the acceptance of plastic is now considered a requirement for any business.
The bill is part of a broader debate over whether the government should regulate interchange fees, as it does in Canada and Australia. Consumer advocates charge that MasterCard and Visa manipulate the interchange fees to the benefit of their bank and credit union owners. The European Union recently found MasterCard guilty of conspiring to manipulate interchange fees in violation of its antitrust laws. The cards giant is appealing that ruling.
MasterCard and Visa have come under increasing pressure over interchange rates, which are normally kept confidential, even from the merchants. The merchants say the two companies, which control 80% of the cards market, unfairly set the rates between them. The bill is particularly aimed at bringing more transparency to the rate structure.
Congressional sponsors of the bill insist their legislation would not regulate interchange fees, but give merchants greater power to negotiate rates.
(c) 2008
