NRF welcomes bill on credit card fees

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NRF welcomes bill on credit card fees

Credit Card Fair Free Act addresses credit card interchange

June 06, 2008

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Washington, D.C.—The National Retail Federation (NRF) is cheering the introduction of a Senate bill that would require Visa and MasterCard to negotiate with merchants over "hidden" credit card processing fees, according to a release from the association.

Democratic Senate Majority Whip Richard J. Durbin of Illinois introduced the bill, known as the Credit Card Fair Free Act of 2008, on Thursday. It is a companion measure to a bill introduced in the House of Representatives in March.

Both bills require credit card companies that possess "substantial market power" to negotiate with merchants to reach an agreement on credit card terms and conditions.

If the two sides can't agree, they are then required to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

At issue is credit card interchange, the non-negotiable fee averaging about 2 percent that Visa and MasterCard charge merchants whenever a customer uses a credit or signature debit card. This fee is effectively passed onto consumers via the merchants, but most consumers don't know about it because Visa and MasterCard keep merchants from disclosing it on receipts and don't disclose it on monthly statements, according to the NRF.

The NRF estimates that such fees cost the average U.S. family $427 a year, totaling about $48 billion annually. This number represents an increase from $378 in 2007, and has nearly tripled from $159 in 2001, the year the NRF began tracking interchange.

Durbin was one of four senators who asked Visa and MasterCard for an explanation of how the fees are set and used.

In addition, last summer, NRF Senior Vice President and General Counsel Mallory Duncan testified before the House Judiciary Committee's Antitrust Task Force on how Visa and MasterCard banks work through each of the two credit card companies to set interchange rates that all banks agree to charge, regardless of which bank's name is on a card.

She testified that by doing so, Visa and Mastercard violate U.S antitrust law by operating as illegal price-fixing cartels.

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