NRF urges Senate to amend Credit Card Reform Bill

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NRF urges Senate to amend Credit Card Reform Bill

Legislation would make cash discounts easier

May 13, 2009

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Washington--The National Retail Federation (NRF) is urging the Senate to approve an amendment to the Credit Card Reform Bill that would make it easier for retailers to offer discounts to customers who use cash or other low-cost forms of payment rather than credit cards that carry high processing fees.

NRF Senior Vice President for Government Relations Steve Pfister said in a letter to members of the Senate that retailers should be able to offer discounts to their customers in any legal way they choose without interference from the credit card companies.

The Senate is expected to vote this week on legislation that would block a number of abusive credit card industry practices such as applying interest rate increases retroactively to existing balances or "double cycle" billing, where interest charges are computed on outstanding balances from more than one billing cycle.

Democratic Sen. Majority Whip Richard Durbin of Illinois and Republican Sen. Christopher "Kit" Bond of Missouri plan to offer an amendment to the legislation that would make it easier for merchants to offer a discount to customers who use low-cost forms of payment.

Current federal law allows merchants to offer a discount in such cases, but complicated credit card company rules make it extremely difficult to do so in practice. The Durbin-Bond amendment would add debit cards to cash and checks on the list of payments for which a discount can be offered, and would prohibit credit card companies from penalizing merchants for offering a discount, for the way in which they display discounts or for directing customers toward a discount payment option.

In addition to adding debit cards to the list of payments for which discounts can be offered, the Durbin-Bond amendment would also allow merchants to offer discounts to customers who use low-fee credit cards rather than high-fee cards.

The legislation would also direct the Federal Reserve to gather and publish information on credit card interchange fees, other credit card fees and rules governing them.

"These rules are essentially hidden today," Pfister said. "Both retailers and the public have a right to more complete information given the billions of dollars involved and the impact these fees have on the cost of everyday goods."

The amendment is aimed at credit card interchange, a fee averaging close to 2 percent that Visa and MasterCard banks charge merchants to process the transaction each time a credit card is used to pay for a purchase. Visa and MasterCard rules effectively require the fees to be built into the price of merchandise, driving up costs for all consumers regardless of whether or not they pay by cash, check or plastic. The fees totaled $48 billion in 2008 and cost the average household $427, according to NRF estimates. Both numbers are three times the levels seen when NRF began tracking interchange in 2001.

The interchange fee varies from as little as about 1.5 percent to as high as about 3 percent, with "premium" cards offering rewards programs to the users carrying the highest fees.

The NRF is the largest retail trade association in the world, with members including department, discount, drug, grocery, independent and specialty stores, catalog merchants, chain restaurants and e-tailers, as well as the industry's key trading partners of retail goods and services.

For more information about the NRF, visit its Web site, NRF.com.

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