The past week has been highly important in the ongoing battle between consumers and merchants vs. the credit card industry. The focus has tightened on the duopoly of Visa and MasterCard in recent years, and after many hearings and much work, a solution might be on the horizon. However, the banks have considerable lobbying assets at their disposal, which means victory is not assured. I realize it's a bit of a long-shot, but I would love to see either Hillary Clinton or Barack Obama pick this up as an issue. If John Edwards was still in this race, I'm sure he would. This is another opportunity for them to appeal to his supporters.
Two bills have been introduced in the House that could make all the difference, both for everyday cardholders and for merchant account holders. Both are hit with ostentatious fees on a daily basis, and the former can incur harsh penalties without even knowing about it. The first is called the Credit Cardholders’ Bill of Rights (H.R. 5244), and the second is the Credit Card Fair Fee Act (H.R. 5546). The first is supported by Rep. Carolyn Maloney, the second by Rep. John Conyers.
Background info on each, below the jump.
First, there's a solid op-ed today in The Hill by Rep. Carolyn Maloney. She starts off by telling the story of a constituent whose rates were doubled even when she had paid her credit card fee in time, but had been late on a payment to someone else. Then she continues:
In recent years, the playing field between credit card companies and credit cardholders has become very one-sided. It is no surprise that it’s average American cardholders, and not the big credit card companies who are getting the short end of the stick.
A credit card agreement is supposed to be a contract, but what good is a contract when only one party has any power to make decisions? Cardholders deserve more bargaining power. Congress can and should help level the playing field for them.
I introduced the Credit Cardholders’ Bill of Rights (H.R. 5244) to give American credit card holders a fair deal. My comprehensive credit card reform bill takes a balanced approach to reforming major industry abuses and improving consumer protections for cardholders. It would put an end to many of the tricks and traps that make cardholders incur interest rate hikes and pricey fees. It would also protect cardholders from arbitrary interest rate hikes, hidden fees, due date gimmicks, and misleading account terms.
Maloney's bill focuses on consumers, and my guess is it needs no explanation. Conyers' bill is just as important, and because merchants pass along fees in higher prices, it matters to consumers, too. Consumer Affairs has the best article on this, here:
For years, retailers and merchants have been waging a quiet war with the financial industry over "interchange fees" -- the hidden costs of processing credit and debit card transactions that can wipe out a store's profits while earning banks a pretty penny.
Now Congress has stepped into the fracas with new legislation that would enable merchants to negotiate the fees they pay for taking plastic.
The "Credit Card Fair Fee Act of 2008," introduced by House Judiciary Committee chairman John Conyers (D-MI), would require lenders possessing "substantial market power" to negotiate with merchants and retailers on terms for fees paid when processing card transactions.
If a voluntary agreement cannot be reached, both sides would have to submit to binding arbitration overseen by the Justice Department and the Federal Trade Commission (FTC).
"This legislation is intended to give merchants a seat at the table in the determination of these fees," Conyers said. "It is not an attempt at regulating the industry and does not mandate any particular outcome. This legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees."
Taken together, if these bills become law, it would be the biggest victory for consumers over the credit card industry in years. Maloney has more info on the Credit Cardholders' Bill of Rights on her website, and Conyers' co-sponsor Chris Cannon has more info on the Credit Card Fair Fee Act on his House page.
This is just background now, and it's a big step just to get these bills introduced. But the real fight lies ahead.