February 25, 2010
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News: New Bill To Fight Interchange Fees
Now that the new credit card reform act has taken effect, nation lawmakers are moving on to conquer the next major battle with the financial industry. A new bill will soon be introduced into the Senate by U.S. Senator Arlen Specter (D-PA) that aims to regulate interchange fees. Several bills are already in circulation in the House. Specter's bill is said to resemble one proposed by Representative Peter Welch (D-VT) which was introduced last year. The bill attacks the giant credit card networks, Visa and MasterCard, and their practice of charging higher interchange fees for premium cards. Consumers reap in higher rewards with premium credit cards causing card networks to charge higher transactions fees to pay for the higher cost programs.
Despite the efforts of several lawmakers, Representative Barney Frank (D-MA), Chairman of the House Financial Services Committee says the committee has no intentions of addressing credit card interchange fees this year. Welch isn't pleased with Frank's decision to exclude his bill from the 2010 agenda and attributes it to "gridlock." He believes that Frank doesn't seem very enthusiastic about talking about an issue that doesn't seem to be receiving much interest in the House. However, mega retailers including Wal-Mart Stores and Target Corp. have petitioned Congress for relief by enacting a law that would lower credit card interchange fees.
According to the National Retail Federation, retailers pay over $48 billion a year to the credit card networks and banks for transaction fees. Card networks set the fees and do not allow merchants to be a part of the negotiations with the banks. Visa, MasterCard, and the Electronic Payments Coalition, a trade group who support the card networks believe the new bill would only serve to hurt Americans in the end. Furthermore, the coalition feels such a law would open up new avenues for merchants to participate in abusive advertising schemes, charging excessive checkout fees, and cardholder discriminations. Proponents of the bill say consumers would not be hurt rather would actually save money with lower transaction fees because in actuality, merchants pass interchange fees onto the consumer with higher product prices.