October 24, 2009
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Back-Burner Interchange Fees Still Causing Heat, Pt.3
I have heard your cry.Albeit a trickle, at least someone was listening. Senator Durbin (D-Ill.) has taken up the cause, He has introduced a bill to the Senate that would provide antitrust protection for the retailers. With that protection, the retailers would be in a position to negotiate credit card interchange rates jointly, between the credit card issuing banks and the "back-end" banks who process the transactions and pay the merchant.. The credit card associations (like VISA and MasterCard) do not benefit directly from these fees but are covered by charging a fee to the banks who are appropriating these collected fees to pay the associations.
In addition to this fundamental provision, merchants would also have the right to reject higher-rate credit cards designed to provide perks and rewards to credit card holders at the expense of the merchant. The merchant gets no recognition but foots the bill. Obviously, retailers are hinging on this legislation.
Other good news is this isn't the only bill in town. The House is tossing around it's own flavor for consideration. One of the unique facets it has is that it would give merchants the flexibility of setting a range of credit that can be used for a given purchase. Kind of like a "min/max policy. This would find it's greatest significance where profit margins are so thin that the retailer can actually lose money by selling his wares using credit cards.
There is more to tell, here. It appears as though the "interchange issue" is also being used as a bargaining chip between the House Financial Services and the larger credit card issuing banks. From the political side of things, it is generally known that chairman of the committee, Barney Franks, has been looking for inroads to pressure the banking community to accept a proposal for the setting up of a Consumer Financial Protection Agency. This story follows in the next article.