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NRF welcomes Senate bill on credit card reform

June 12, 2009

Washington--The National Retail Federation (NRF) has welcomed the introduction of Senate legislation that would require Visa and MasterCard to negotiate over hidden credit card processing fees that cost the average household more than $400 a year and total more than $48 billion annually.

"This bill is the next step in the credit card reform process that Congress began last month," NRF Senior Vice President and General Counsel Mallory Duncan said in a media release. "Congress can't claim to have fixed credit cards without addressing the billions of dollars in artificially inflated prices that result from credit card interchange fees. This legislation shows that lawmakers are ready to finish the job and protect consumers from these rapidly increasing fees."

Democratic Sen. Majority Whip Richard Durbin of Illinois introduced the Credit Card Fair Fee Act of 2009. The measure is similar to legislation Durbin sponsored last year and would require Visa and MasterCard banks to negotiate over "interchange" fees that are currently imposed on merchants on a take-it-or-leave-it basis. If an agreement could not be reached, both sides would be required to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

Introduction of the Durbin bill comes less than a week after Democratic House Judiciary Committee Chairman John Conyers of Michigan introduced H.R. 2695, also called the Credit Card Fair Fee Act of 2009. The Conyers bill would also require Visa and MasterCard banks to negotiate with merchants, but enforcement of the requirement would be up to the Justice Department rather than a three-judge panel.

Interchange is a fee averaging close to 2 percent that Visa and MasterCard banks charge merchants every time a credit card is used to pay for a transaction. Visa and MasterCard effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of merchandise and making cash discounts difficult. Interchange is largely unknown to most consumers because Visa and MasterCard keep merchants from disclosing it on receipts and don't disclose the fees on consumers' monthly statements.

Interchange collections totaled $48 billion in 2008, up from $16.6 billion when NRF started tracking the fees in 2001. The higher prices that result from the fees cost the average household an estimated $427 last year, up from $159 in 2001.

Interchange received significant attention last month as Congress considered the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which was signed into law May 22 by President Obama. The Credit CARD Act includes a provision requiring the Government Accountability Office to conduct a study of how interchange drives up retail prices, why the card industry refuses to disclose the fees to consumers and how card companies keep retailers from offering cash discounts, among other issues.

Durbin sought to add an amendment to the Credit CARD Act that would have prohibited credit card companies from interfering with retailers who offer a discount to customers who pay by cash, check or debit card rather than credit card, but the attempt was blocked by card industry lobbying efforts. The discount is not included in his interchange bill, but Durbin has said he will attempt to attach it to other legislation.
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