HOME DEPOT EXEC: MERCHANTS ON ‘WARPATH’ AGAINST INTERCHANGE FEES

Merchants are "on the warpath" to push for legislation that would cut or cap credit and debit card interchange rates this year, Mario de Armas, director of international and interchange financial services at The Home Depot Inc., told attendees this week during a panel discussion at Source Media's 21st annual Card Forum and Expo at Marco Island, Fla.

"The cost for us to accept credit and debit cards continues to rise, and we have to pass those costs on to our consumer and commercial customers ... who can least afford it in this economy," de Armas said, adding that " Visa and MasterCard have done a very poor job of communicating the value of what interchange provides."

He noted that interchange began as a more clearly defined subsidy to help cover the cost of electronic payments, then mushroomed to become "a profit center for banks."  De Armas said Home Depot plans to drop its co-branded MasterCard issued by Citigroup Inc., noting customers purchase more with the company's proprietary credit card (also issued by Citi).

Moreover, the company is looking into why its payment terminals require cardholders to opt out of signature-debit if they want to use less-expensive PIN-debit instead.

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Panelist William W. Shaw, group vice president at Roanoke, Va.-based First Citizens Bank, which is both a credit card issuer and an acquirer, said on the issuing side he is "very concerned" about the possibility of interchange-rate caps. "It seems we're moving further and further away from free enterprise, ... and I'm very concerned about capping anything, from the free-enterprise side of it." On the acquiring side, when credit card networks reset rates each year, "it's hugely expensive," and the system is "too complex," he said.

Panel moderator Adil Moussa, an analyst with consultancy Aite Group, said recent research from his organization found that some 28% of U.S. merchants routinely attempt to steer customers toward lower-cost payment options at the point of sale to offset the effects of interchange. Home Depot, a member of the Merchants Payments Coalition, is working closely with other merchants on lobbying efforts, de Armas said, noting he is "cautiously optimistic" that lawmakers will draft legislation this year that could lead to a reduction or elimination of interchange.