Industry Reps Say Interchange Hearing Put Their Side On The Spot

Card industry representatives are criticizing a Washington hearing into federal payment of interchange fees that they say gave their side little opportunity to advance its position.

In a June 15 Senate Appropriations Committee hearing, the witnesses included a merchant and a consumer advocate. The payment industry's lone witness, Bruce Sullivan, Visa Inc.'s vice president and head of government services, seemed ill prepared to answer Durbin's pointed questions about consumer interchange; he declined comment on several points, saying he lacked sufficient information to answer.

The Electronic Payments Coalition, comprised of the nation's largest banks and payment networks, said it was an unfair approach to debating consumer interchange, and that the government payments forum was not a fair substitute for an official Senate hearing.

"It was highly inappropriate at a hearing on the use of government payments to have both a convenience store representative and a consumer public interest group advocate testifying," Trish Wexler, a coalition spokeswoman, said.

While MasterCard Inc. last week remained silent on the debit-interchange amendment in the regulatory reform bill, Visa on June 14 tried to move the debate into the public sphere by announcing a survey that it said shows consumers oppose the amendment.

Visa said a survey of 1,000 U.S. adults Fabrizio, McLaughlin & Associates conducted in June revealed that 83% of respondents said they would oppose the amendment if it would result in higher fees for debit cardholders; 75% of respondents would oppose overall financial-services reform if it resulted in consumers having to pay more to use a debit card, and 60% said they believe retailers should bear the cost of accepting credit and debit cards.

Visa declined to provide a copy of the survey or its questions.

The card industry received support last week from a bipartisan group of legislators who are opposed to the amendment.

Sixty Republican members of the house and 71 Democrats outlined their "grave concerns" about the amendment in a letter sent to conferees who are currently trying to merge the House and Senate versions of the bill.

The letter, issued Wednesday by Debbie Wasserman Schultz, a Florida Democrat, contends that the amendment could harm consumers and disrupt a complex payments system, without adequate congressional review or discussion.

The amendment's author Sen. Richard Durbin, D-Ill., assembled hearings last week on credit and debit card interchange, but observers said the debate was one-sided. The amendment would enable the Federal Reserve to establish new debit interchange rates and allow merchants to set minimum-purchase amounts for accepting cards.

Durbin did concede one point to state governments. During the hearing he said he would exempt prepaid debit cards used to distribute government benefits.

Durbin said he plans to "specifically carve out these government types of cards so they would not be affected by anything related to the private sector," adding that electronic benefits transfer payment cards are "a special case."

Officials from more than a dozen states have notified Durbin that the amendment could raise the costs to administer benefits through prepaid debit cards and could limit consumers' payment options at the point of sale.