Washington, DC, July 19, 2006--The National Retail Federation welcomed a hearing on soaring credit card interchanges rates scheduled to be held today by the Senate Judiciary Committee.
The hearing is expected to focus on the $26.3 billion in credit card interchange fees collected each year, the impact of the fees on American retailers and consumers and whether the price-fixing practices involved in setting interchange fees violate federal antitrust laws.
“We are pleased to see the Senate examining anti-competitive collusion at Visa and MasterCard that takes billions of dollars out of consumers’ pockets every year,” NRF senior vice president and general counsel Mallory Duncan said. “Americans pay some of the highest credit card interchange fees in the world, but most consumers don’t even know these fees exist because Visa and MasterCard make it virtually impossible for merchants to tell them. We think the time has come to put an end to Visa and MasterCard’s price-fixing, their lack of openness with the public and the windfall profits they’re making as a result.”
“The call to investigate these fees is growing louder every day,” Duncan said. “Close to 50 antitrust lawsuits over credit card interchange fees have been filed against Visa and MasterCard in federal court since last summer, two Federal Reserve banks held conferences last year, the House held a hearing in February and now the Senate is launching an inquiry of its own.”
“A key issue for the Judiciary Committee is the anti-competitive way these fees are set,” Duncan said. “Rather than competing to set the lowest fees and hold down costs for consumers, Visa and MasterCard’s idea of competition is to set higher and higher rates in order to maximize profits for the banks that issue their cards. In addition, the banks that make up Visa and MasterCard have colluded to set these fees, operating in a price-fixing cartel that would be a clear violation of federal antitrust law in almost any other industry. These fees are driving up the price of everything we sell. We are confident that the Senate will set the real-life interests of consumers ahead of the special interests of banks and credit card companies.”
The Judiciary Committee is scheduled to hold a hearing today on “Credit Card Interest Rates: Antitrust Concerns?” The hearing will be held at 9:30 a.m. in Room 226 of the Senate Dirksen Office Building.
Duncan is chairman of the Merchants Payments Coalition, a group formed last year by NRF and other merchant trade associations to fight rising interchange rates.
Interchange is a percentage of each transaction that Visa and MasterCard banks collect from retailers every time their credit or debit cards are used to pay for a purchase. The fee varies with type of card, size of merchant and other factors, but averages close to 2 percent for credit card transactions. Total credit and debit card interchange collected by Visa and MasterCard amounted to $26.3 billion in 2004, according to the Nilson Report, a business magazine that covers the credit card industry. With interchange fees rising and the use of credit and debit cards expanding, the amount is up 58 percent above the $16.6 billion collected in 2001.
Unlike other credit card fees that show up on a monthly statement, the interchange fees paid by consumers are not disclosed to cardholders. Visa and MasterCard’s non-negotiable contracts require merchants to include the Visa and MasterCard fees in the price of merchandise, forbidding them from being shown on cash register receipts and effectively barring cash discounts. As a result, even cash customers are effectively required by Visa and MasterCard to pay the fees.
