June 02, 2010
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States Slam New Financial Reform Amendment, Pt.2
Merchants want more flexibility.Major credit card networks, Visa and MasterCard allegedly began making threats saying that if the amendment were passed, the companies would increase the percentage banks pay in debit and credit card interchange fees. Angered by the threats, Durbin sent a letter of disapproval to the two card networks. However, Visa and MasterCard's threats haven't changed the minds of lawmakers who believe it is fair and just to give merchants more flexibility in determining what form of payment they will accept. Visa and MasterCard say that merchants are only trying to pass the cost of business down to their credit card customers, however, if true, all consumers pay the price. Most efforts to criticize retailers in this manner have failed and it appears the big guys have switched strategies by playing the "harm to government benefits" card.
According to Representative Peter Welch (D-VT), Visa and MasterCard threats to raise debit and credit card payment processing fees is their way of trying to hold on to their pricing power. However, Osborn reputes by saying that the amendment could force higher government costs at a time when they are already struggling. From a consumer point of view, if debit and credit card fees aren't reined in, consumers who have already suffered the burden of meeting day to day needs of their families could themselves crack. Osborn also noted that with electronic payment, governments cost for processing payment has gone from $ 0.60 dramatically to $ 0.015. That's a huge savings for the government. He also mentioned that that 46 other U.S. states use the same type of electronic payment to issue unemployment, child support and payroll expenses.
There's no question that both the federal and state governments benefit from the debit and credit card programs. The Federal Government alone disburses over $70 billion a year through the electronic payment system and that number continues to rise. It remains to be seen what the benefits or consequences to the end consumer would be under either circumstance, however, it is likely that the benefit will impact the merchant more than any other sector.