The U.S. House Judiciary Committee is resurrecting discussion about credit card interchange regulation with a hearing scheduled for April 28 on Capitol Hill. The hearing before the full committee will focus on the “Credit Card Fair Fee Act,” which committee member John Conyers, D-Mich., introduced in 2008 and 2009.
The bill, which hinges on antitrust law, would require Visa Inc. and MasterCard Worldwide to negotiate interchange rates with merchants. The U.S. Department of Justice would oversee negotiations.
Merchants are hopeful that the Conyers bill, which stalled after the committee approved it on a vote of 19 to 16 in July 2008, this year makes its way to a full House and Senate vote. Conyers reintroduced the bill in June 2009.
“Congress and the public are taking a closer look at financial-service operations this year,” says a spokesperson from the Merchants Payments Coalition, which represents the nation’s largest merchants, including the National Retail Federation. This “gives us hope that the Conyers bill, which would make banks sit down and negotiate fees that are more in line with the actual cost of processing transactions, might move forward this year,” he tells PaymentsSource.
The coalition claims consumers in 2008 paid some $48 billion in credit card interchange fees merchants passed along through the prices they set for their products and services.
Witnesses slated to testify before the committee include Douglas Kantor, a partner with Washington, D.C.-based Steptoe & Johnson LLP who is a lawyer for the merchants coalition; David Carpenter, president of a six-store Urbanville, Iowa-based convenience-store chain; Ed Mierzwinski, consumer program director for the Washington, D.C.-based U.S. Public Interest Research Group; and John Blum, vice president of operations at Virginia Beach, Va.-based Chartway Federal Credit Union.
Convenience-store operators earlier this month initiated fresh lobbying efforts for interchange reform, circulating a new interactive Web-based video describing how interchange cuts into merchants’ profits (see story).
The renewed push for interchange reform follows a variety of merchant efforts in recent years to focus attention on interchange and push legislation that would reduce fees merchants pay. Efforts culminated last year with 7-Eleven Inc. gathering 1.6 million consumer signatures, which the convenience-store company trucked to Washington, D.C., to help persuade legislators of the need for reform.
Visa and MasterCard separately claimed that 7-Eleven’s petition drive was misleading because it suggested consumers would directly benefit from interchange-rate cuts (see story).
The American Bankers Association today is sending a letter to lawmakers urging them to oppose the bill, a spokesperson says. The association says interchange is a business-to-business issue, pointing to a government study commissioned last year that suggests it would be difficult to quantify savings that retailers might pass on to consumers if the card networks reduced their interchange rates (see story) .
The Electronic Payments Coalition, which represents the major card brands, says merchants have no new arguments to sway lawmakers. “No matter what legislative committees merchants approach, sooner or later lawmakers figure out that interchange-rate legislation would end up hurting consumers and especially the smaller institutions that serve them,” a coalition spokesperson says. “If interchange is forced down to below sustainable levels, financial institutions will be forced to raise rates, add annual fees, reduce or eliminate rewards programs, or stop issuing credit and debit cards altogether, reducing competition and consumer choices.”
Merchants also are hoping to see revived interest in another interchange-related bill Rep. Peter Welch, D-Vt., introduced last year before the House Financial Services Committee. Welch’s bill would give the Federal Trade Commission oversight of interchange rates, including enabling merchants to set minimum payment amounts for card transactions and to steer customers to less-costly payment methods.
House Finance Committee Chairman Barney Frank, D-Mass., earlier this year said interchange legislation is “not on our agenda this year.” (see story)
But merchants hold out hope that the Welch bill still could pass this year if it were tacked on to other legislation. The Conyers and Welch bills ideally would work “hand in hand” to reduce interchange fees, the merchants coalition spokesperson says.
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