The passage this week of a Vermont bill to let merchants set minimum amounts for card payments (see story) has refocused retailer groups' attention on similar federal proposals.
Merchant groups that support the measures say the Vermont bill, which has not been signed into law, gives more credence to their argument that change is needed. But getting such proposals enacted will remain an uphill struggle against intense card industry opposition and a congressional priority on financial regulatory reform.
The Vermont bill "has exposed some of the difficulties merchants have in dealing with credit cards and what some of us see as fundamental unfairness," said state Sen. John Campbell, a Democrat who voted for it.
On Tuesday the Vermont Senate unanimously approved the bill the state House of Representatives had passed last week. It is expected to be sent to Gov. Jim Douglas for signing by the end of the week.
"He hasn't made up his mind what he will do with the bill," said David Coriell, a spokesman for the governor.
Douglas' biggest concern is "whether or not the legislation is ultimately beneficial to consumers or to the retailers," the spokesman said, adding that Vermont would be the first state to enact such legislation.
"He has concerns about being the first state out on an island where we're regulating something that people use across state lines," Coriell said, and whether "we're regulating in such a way that might put Vermont at a competitive disadvantage."
If enacted, the legislation would take effect Jan. 1.
The biggest step the bill takes is to let merchants set minimum payment amounts up to $10.
Campbell acknowledged that provisions included in early drafts of the legislation focused on negotiating for interchange fees and greater leeway for merchants to discount for different types of debit and credit cards.
The final version was "not as grand as we would have liked to see," Campbell said, but is "still a victory for small businesses and merchants."
"I hope that this will be the impetus for the federal government to continue" pushing on the issues, he added.
Numerous federal proposals to limit interchange fees and give merchants more latitude on card-acceptance practices have been put forward unsuccessfully, and such efforts were revived in recent days. Sen. Dick Durbin, D-Ill., has introduced several amendments to the financial regulatory reform bill that would limit the fees that federal agencies pay to accept card payments, prohibit fines on merchants for offering discounts on certain types of cards and let merchants set minimum and maximum dollar amounts they will accept in card payments.
"Certainly any type of movement we can get" at "the state level will hopefully translate to the national level," said John Emling, the senior vice president of government affairs at the Retail Industry Leaders Association.
Opponents played down the passage of the Vermont bill.
Ken Clayton, the senior vice president of card policy at the American Bankers Association, said he doubts the state legislation will do much to tilt debate at the national level. "Many states have already widely turned back similar efforts by retailers," he said.
That some of the more controversial provisions of the Vermont bill were changed or deleted should send a signal to proponents of national efforts that such legislation does not enjoy widespread support, said Trish Wexler, a spokeswoman for the Electronic Payments Coalition.
The Washington trade group represents payments companies, including Visa Inc. and MasterCard Inc.
The coalition and the major card networks say letting merchants set minimum acceptable payment amounts would harm consumers by forcing them always to carry cash or purchase more things to meet the minimum.
Shawn Miles, the group head of global public policy at MasterCard, said Wednesday that its card-acceptance rules already let merchants offer discounts for accepting different types of payments. "We're surprised, since the merchants have that concern about the cost with cards, that they don't offer more discounts for cash" payments, Miles said.
MasterCard thinks "the motivation behind this is really to put merchants in the position where they don't pay their fair share," Chief Executive Robert Selander said in response to an analyst's question Tuesday during the Purchase, N.Y., company's earnings conference call.
"At the end of the day," he said, "someone's going to have to pay this, and to the degree these amendments, as some of them seem to be getting structured," move ahead, "then consumers would wind up being penalized. So we're paying attention to these things."
A Visa spokesman referred questions about the Vermont bill to the Electronic Payments Coalition but did say retailers have "numerous options to manage their acceptance costs." These include shopping around for the best acceptance prices offered by acquirers, negotiating for lower fees with their acquiring bank, steering consumers to other forms of payment and offering discounts for cash, check or PIN debit transactions, which are cheaper than signature debit.
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