Yesterday’s diary, reported Congress is having hearings today to consider seriously needed reforms to our countries credit card practices – but now Republican opposition may stop its passing. This legislation, which enjoys bi-partisan support from many Democrats and Republicans, is aimed at helping reduce the hidden interchange fee through increased transparency, but Reuters reports (bold added):
"A consumer group, the U.S. Public Interest Research Group, said it supports legislation because it would create a mechanism pressuring both merchants and the credit card companies to negotiate fees.
‘The panel (would) not set prices or establish government price controls,’ said Edmund Mierzwinski, consumer program director at U.S. PIRG. ‘It is an oligopolistic market in which a small set of cardholders dominate the market and establish a set of deceptive practices.
The bill has little chance of becoming law this year due to Republican opposition and the dwindling number of congressional work days left before the November election.’"
More details below.
The Credit Card Fair Fee Act being discussed at today’s hearing has the support of both merchant and consumer groups alike. The only groups not supporting reform for what is tantamount to price fixing by the credit card industry is the industry and banks themselves who reap the rewards of the hidden fees. The National Retail Federation reported today that the average American family is losing $400 a year to these fees:
"The National Retail Federation urged the House Judiciary Committee to support antitrust legislation scheduled for a hearing today that would require Visa and MasterCard to negotiate with merchants over credit card processing fees, saying a hidden fee charged by the two card giants is projected to cost the average U.S. family more than $400 this year."
Additionally, the MPC reported today in a press release how much the interchange fee is hurting convenience stores in particular. The release reports that they are paying twice as much in fees to the credit card industry than they made in pre-tax profits :
"The Credit Card Fair Fee Act would provide a market-based mechanism to address the sky-rocketing costs of the credit card interchange fee, a $42 billion dollar a year credit card fee paid by merchants and consumers through higher retail prices... ‘It is clear that the price for the cashless society is way too high if you let the credit card industry fix the rate.,’ said Tom Robinson, CEO of San Jose, CA based convenience store and gas chain Rotten Robbie. Robinson is also serving as vice chairman of government relations for of the National Association of Convenience Stores, a member of the MPC. In 2007, convenience stores, which sell 80 percent of the fuel purchased in the United States, paid more than twice as much to the credit card industry ($7.6 billion) as they made in pre-tax profits ($3.4 billion)."
Reuters also quoted Robinson when reporting on how badly these fees are hurting gas station owners. Remember, these are small business owners – not the oil companies or large chain owners – but the same people politicians always state they are looking out for. Reuters reports:
"One operator of gasoline stations and convenience stores told the House panel that initial public stock offerings by Visa in March and by MasterCard in 2006 did little to foster competition.
‘The situation is just as bad,’ Tom Robinson, a member of the National Association of Convenience Stores, told the panel. ‘The same banks continue to agree to charge the same interchange fees and refuse to compete.’"
While this issue isn’t as exciting as the election to most – it is still an issue where Republican opposition is hurting average Americans and small businesses alike. The Credit Card Fair Fee Act is the type of legislation that any member of Congress should be supporting regardless of party – but clearly shows you what type of member they are if they are not. It is also the type of legislation that is worth vocally supporting and if you don’t know if your representative is behind it, I strongly encourage you to ask and find out.