@BankThink

You know there's lot of money at stake when a consultant and a couple of law firms spar over the issue of interchange regulation.

George Sutton, a partner at Jones Waldo Holbrook & McDonough, took issue with comments by two partners at another payments law firm, Constantine Cannon LLP.

The Constantine Cannon partners characterized the fees that credit card networks charge merchants on debit transactions as a "hidden tax on consumers" and said the fees are "hardly necessary" to the debit system.

"Someone has to pay for the debit card system," Sutton countered. "There are two possibilities, the customer or the merchant. We know the merchant doesn't want it to come out of its income, but taking that burden off of the merchant and putting it on the card holder instead is hardly pro-consumer."

Sutton added that Constantine Cannon's argument ignores the benefit that merchants receive from the use of debit cards.

"Debit cards replace checks and do not bounce," he said. "Losses due to bad checks were large before plastic. This savings directly offsets the cost of interchange. Nothing would offset the cost to consumers if they had to pay the full cost of the debit card system through interest and fees."