April 29, 2010
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News: Conyers Opens Discussion On CC Fair Fee Act
House Judiciary Committee Chairman John Conyers Jr. (D-MI) opened the discussion today on the need to include interchange fees in the Credit Card Fair Fee Act. Conyers noted that with the changing payment environment and nearly 600 million credit cards in circulation, it is vital that fees associated with card use is "set and applied fairly." In his statement, Conyers also said that most consumers are unaware of the costs associated with the use of a debit and credit card and how those costs are transferred on to them. In a great deal of cases, consumers make small purchases with their cards at convenience stores and then get cash back without realizing that because of high interchange fees, the merchant just lost money. The only way for the merchant to recoup his losses is to raise costs.
Three points for discussion were outlined by Conyers. He asked that the committee considered the following three points:
• Explore how credit card processing fees impact the merchant. Interchange fees cost merchants nearly $50 billion a year whereby the banks, card networks, and higher end reward card's customers benefit. They are the second highest expense for retailers.
• Explore how credit card processing fees impact the consumer. A portion of the interchange fee is passed on to the consumer. Therefore, consumers who pay in cash end up paying for the convenience of others who pay by credit cards. The typical customer paying in cash are those in the lower economic group who do not qualify for credit. Not only are large firms extracting money off of consumers, they are also "skimming" money off charitable organizations who fund such relief efforts as those for earthquake victim in Haiti.
• Address the "inequities" in credit card payment processing fee negotiations and fee setting for both retailer and consumer. The proposed legislation provides a "one-shot reset" that would bring banks, card networks and merchants at the round table for interchange fee negotiations.Opponents of the legislation argue that it would interfere with free trade. Others say only the merchant will benefit from such a bill and the consumer will continue to lose as merchants continue to pass on credit card processing fees to them. Conyers said the bill has protective measures to ensure retailers are using the saved money to lower prices.