You gotta love it. As I reported here earlier in the month, Rep. Conyers' antitrust committee was planning for hearings looking into the credit card companies' practices regarding interchange -- the hiddenest fee of all, charged to merchants but which the card companies keep retailers from telling customers about, even as it raises all prices.
Will something finally get done on this overlooked issue? More from Conyers and more on this question below the fold.
Here's the opening to the coverage today from American Banker (not online):
At a House Judiciary Committee antitrust task force hearing Thursday, lawmakers expressed skepticism that card interchange fee rates are being set fairly and questioned whether the situation would require government intervention.
Retail and consumer witnesses told lawmakers that Visa U.S.A. Inc., MasterCard Inc., and banks conspire unfairly and illegally to charge merchants and their customers overly high fees for operating the system.
"Are interchange fees imposing an unfair cost on the consumer?" House Judiciary Chairman John Conyers, D-Mich., asked at the outset. "Are interchange fees increasing at too rapid a rate, and why? And finally, are our friendly credit companies engaging in anticompetitive behavior."
After he heard the testimony, he said, "It doesn't look so good for the credit card companies."
And here's a nice quote, from Reuters:
"While I come into the hearing with an open mind, I do believe the burden of proof lies with the credit card companies to reassure Congress that increasing interchange fees are not harming merchants and ultimately consumers," said Michigan Democrat John Conyers, who chairs the panel.
And Mallory Duncan, who leads the merchant group I work with, testified, and there's some great quotes from his testimony in Associated Content.
Some more commentary from Digital Transactions:
Interchange, however, has become a major expense for supermarkets since card payments took hold in that industry beginning in the early 1990s, said Steven C. Smith, chairman of the Food Marketing Institute, a grocery trade group, and president and chief executive of Abingdon, Va.-based K-VA-T Food Stores Inc., a 95-store regional chain that operates under the Food City banner. Claiming that the FMI’s 26,000 stores "have all been put in the position of having to pass along the costs of these credit card interchange fees," consumers as a result "pay over $4 billion annually in FMI member stores, and because the fees remain hidden, they don’t even realize it!"
According to consumer advocate Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group, credit card interchange cost merchants and consumers $36 billion in 2006. And Mallory Duncan, senior vice president and general counsel of the National Retail Federation and spokesperson for the Merchants Payments Coalition advocacy group, disagreed with Muris about the effects of Australia’s interchange cap. He said the cap has lowered merchants’ costs while spurring issuers to offer more low-interest-rate and low-fee cards with no rewards, and offer rewards cards that have higher rates and fees. The result, he said, is that issuers have to compete on price. "Indeed, this resulting price competition is precisely the outcome the card systems feared," he said.
From reading the news stories, it doesn't seem like Republicans are sticking up for the banks. The only quotes taking a different stand are from, surprise surprise, the banks.
All of which doesn't answer the question of what happens next, but the fact that the hearing occurred at all is highly encouraging. Now that the banks have started to give a bit on things like sudden rate hikes, more pressure like this can bring changes here, too. If you want, our website has a nifty tool that will help you generate a letter to your congressperson about the issue.
Interchange has seemed like an intractable issue, at least for those of us who have been following it closely. It's also been much overlooked compared to the fees that directly target consumers. But the indirect fees can be even more pernicious.