The HomeATM PIN Debit Blog continues to track legislation (H.R. 5546) designed to give business owners leverage in negotiating fees associated with credit card transactions. The House Judiciary Committee is in session to mark up the bill today, July 16.Each time a consumer uses a credit or debit card to purchase something, the merchant is charged a fee on the sale. The money goes to the merchant’s bank, the consumer’s bank, and the credit company. H.R. 5546 would give merchants a seat at the table in determining those fees, which supporters of the bill say are too high.
If costs are reduced for merchants, as the proposal anticipates, it is unclear how lawmakers can ensure merchants’ benefits will be passed on to consumers. Some lawmakers are asking “how do we know that an oil company will not pocket any cost savings without reducing the price at the pump?” Further, lawmakers are also concerned that disrupting the existing system of default “interchange rates” under which payments are made by a merchant’s bank to a consumer’s bank, will provide disastrous for small banks and credit unions.
The legislation would create a limited antitrust immunity for merchants to negotiate fee agreements. If talks result in a stalemate, both sides would have to enter binding arbitration overseen by a panel of judges appointed by the Justice Department and the Federal Trade Commission.
The percentage is currently set by credit card providers, generally Visa or MasterCard, and averages 1.75 percent of a purchase. In 2006, it has been reported interchange fees amounted to $36 billion, up 117 percent since 2001. Last year, the fees amounted to $42 billion and are passed on to consumers in the form of higher prices for goods and services. Visa lowered interchange fees on gasoline sales last month after MasterCard capped its fees for gas purchases of more than $50. No word on what action American Express may have taken.
Critics of the legislation, such as MasterCard, contend it would set price controls. MasterCard officials told the House Judiciary Committee’s antitrust task force at a hearing in May the existing system is an efficient one and the bill would create price controls that would harm card services offered to consumers. It appears now that the Justice Department, the Federal Trade Commission, the Pentagon Federal Credit Union, and others have now come out and criticized the legislation.
I have learned a manager’s amendment is underway that would replace the panel of judges with Justice Department oversight, but would maintain the antitrust exemption for retailers. It is unclear where this legislation is headed, and the HATM Blog will continue to provide updates as information becomes available. If you'd like to watch the hearing, click the link below: (requires Real Player)
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