October 9, 2009
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News: Frank and Welch Slam CC Companies
Small retailers were on hand Thursday to give support to Representative Peter Welch's (D-VT) plea to the House Financial Services Committee to put an end to abusive practices for credit card payment processing. One of Welch's supporters testified to the committee on how the unfair structuring of credit card interchange fees actually take money out of the retailer's pocket rather than adding. Retailers are forced to pay the fees by large credit card networks such as Visa and MasterCard while being completely shut out of any negotiation activities. Interchange fees, often referred to as "swipe fees" are established through negotiations between the banks and the card networks in closed door sessions.
New proposed legislation would allow merchants to set minimum purchases on credit card purchases and offer discounts to consumers for choosing alternative payment methods. It also calls for greater transparency requiring card networks to disclose terms of interchange fee agreements to merchants and consumers. If passed, the new bill would also increase the Federal Trade Commission's authority in determining if any unfair or anti-competitive practices are violating law. In his statement to the Committee, Welch talked of the need for "fairness and reasonable regulation of credit card and large bank practices."
Credit card companies took another plow at the meeting as Representative Barney Frank, Chairman of the Committee, sounded off on the need to move the effective date up for new legislation that was signed by the President in May. New rules governing card lenders is scheduled to take effect on February 22, 2010. Frank says lenders are taking advantage of the excess amount of time given for them to prepare for the new law with continued abusive practices including raising interest rates and implementing stiff penalties. Representative Frank has drafted new legislation that would move the effective date to December 1, 2009. While many of the nation's lenders are raising interest rates, Bank of America, the second largest card company in the U.S. released a statement earlier this week stating they would not implement any new interest rate increases prior to the February enactment date.