May 11, 2010
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News: Interchange Fees Stirs Up More Trouble
As the credit card interchange fee battle continues to escalate, the next strategic move is launched by Senator Richard Durbin as he prepares to propose his amendment to Senate bill S.3217. The bill is currently being debated in the Senate which aims to limit the abilities of major credit card networks in regard to interchange fees. Interchange fees are those paid by merchants each time a debit or credit card transaction is processed. A portion of the fee goes to the card issuing bank, the merchant's bank and the major networks Visa and MasterCard. It is estimated that interchange fees cost U.S. merchants over $48 billion each in 2008 and 2009. Merchants claim them to be the second highest cost on their profit and loss statements.
Durbin will be asking Congress to amend the current bill to restrain the fees and give merchants a bigger voice in setting credit card transaction fees. In a news conference, Durbin stated that he believed the credit card interchange fee amendment will the first of its kind debated on the U.S. Congress floor. Meanwhile, a group of financial industry advocates say the amendment would be a "devastating" blow to the banking and credit union industry. The group consisting of the American Bankers Association, Credit Union National Association, Independent Community Bankers of America and the National Association of Federal Credit Unions together comprised a letter that was sent out to every member of the U.S. Senate in opposition of the amendment.
In their letter, the group also stated concern over the fact that no hearing has taken place to debate the credit card interchange fee amendment. Such a hearing would give the financial industry to opportunity to defend their opposition. The letter also pleaded for the Senate to prudently examine the consequences to consumers and bankers alike. Furthermore, the group noted that previous action undertaken by other countries only served to harm the banks and consumers while awarding millions of dollars in extra earnings to merchants.