WASHINGTON -- In a rare piece of bipartisan unity, House Judiciary Chairman John Conyers (D-MI) and Representative Bill Shuster (R-PA) introduced the Credit Card Fair Fee Act of 2009 (HR 2695). The lawmakers say it seeks to address the more than $48 billion paid annually in credit-card interchange or "swipe" fees. The proposed law would provide retailers a system to negotiate fees and potentially reduce the cost to consumers.
In the current market, swipe fees are set in secret and hidden from consumers' view, but passed along in what critics have dubbed a "shadow tax." These fees average about 2% in the U.S., the highest in the industrialized world. The Credit Card Fair Fee Act would provide limited antitrust immunity to groups of merchants for negotiating access rates and terms, potentially leading to lower fees.
"It is time to level the playing field for merchants and consumers," Conyers said. "This legislation will give merchants a seat at the table in determination of these fees. It is not an attempt at regulating the industry and does not mandate any particular outcome. This bill simply enhances the competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees."
In addition to potentially lowering the cost to consumers by reducing the cost to merchants, the legislation could also spur increased adoption of electronic transactions in fields where credit and debit cards were previously economically impractical. These include industries like full-line and bulk vending and coin-operated amusements.
"Many of the merchants who get hit by interchange fees are small businesses that can't absorb the charges as easily as their larger competitors. For too long, merchants were locked out of the decision-making process between banks and that needs to change," said Shuster. "This legislation will give merchants a much-needed seat at the table to negotiate a better bargain on credit card fees and charges that will help businesses and consumers alike save money."
However, the initiative is currently facing stiff opposition by the financial services industry. A lobbying group called the Electronic Payments Coalition, funded by that industry, is portraying the measure as a "sweetheart" deal for large retailers and detrimental to small banks and businesses. In a statement issued on the organization's website, the group argued that the current system is necessary, particularly during the current recession.
"Interchange is a cost of doing business, just like postage expenses, the cost of accepting checks or website management expenses," the EPC website stated. "Merchants that choose to accept debit and credit receive significant benefits for doing so -- and they pay a few pennies on the dollar for these benefits. Furthermore, there is nothing prohibiting merchants from disclosing any business expenses right on the customer receipt."
This is not the first time the issue of swipe fees has come up before the Congress. Both Congress and the Senate have held hearings focused on swipe fees, though the banking industry has so far successfully lobbied against reform. The Credit Card Fair Fee Act comes at a time when profits from interchange fees are at a record high, totaling some $48 billion, an increase of more than 180% since 2001.