November 28, 2008
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News: Retailers Strike at Interchange Fees
Retailers are taking advantage of an opportunity to address what they deem to be an unfair practice in the credit card industry. They charge that the credit card industry is wrongly expecting the retailers to fund new consumer accounts instead of making the consumers pay annual fees. It's an old argument and been bandied before Congress many times before. The difference now is that Congress is in the process of restructuring credit card practices, and various large retailer associations around the country are trying to turn up the heat. The retailer associations are seeking more power to negotiate with the credit card associations in assessing interchange fees.
Large retailers like Target Corp. contend that credit card issuers have been offering sweet deals for new card customers off the backs of the merchants. Meanwhile, the merchants have had no avenue with which to negotiate fees passed on to them and are stuck with whatever terms the credit card associations pass on to them. So they're pursuing this rare opportunity when the government is in a position to deal with the card associations. They would like to see it happen before the government bails the industry out.
These merchants would like to see an antitrust exemption so that merchant associations will be able to negotiate charges like interchange fees they must pay. These charges range anywhere from one to two percent of each sale being charged on a consumer's credit card. The customers are not made aware of these charges but the charges come directly out of retail profits, serve as a free service to cardholders and as a source of revenue for the cardholder's issuing bank. Retailers would like these fees to be addressed in January, when Congress goes back in session.
Again, this struggle has been ongoing for a long time now and not much has been done about it. Retailers regard this issue as a serious one. So far, the discussions have reached the House Judiciary Committee and approval was gained in July, but the discussion has yet to reach the full House or Senate. More articles will follow, as events evolve in this case and the credit card industry begins to be restructured.