For Immediate Release
Contact: J. Craig Shearman (202) 626-8134
shearmanc@nrf.com
Retailers
Welcome Senate Hearing on Interchange Fees
WASHINGTON, D.C., 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.
The National Retail
Federation is the world's largest retail trade association, with membership that
comprises all retail formats and channels of distribution including department,
specialty, discount, catalog, Internet, independent stores, chain restaurants,
drug stores and grocery stores as well as the industry's key trading partners of
retail goods and services. NRF represents an industry with more than 1.4 million
U.S. retail establishments, more than 23 million employees - about one in five
American workers - and 2005 sales of $4.4 trillion. As the industry umbrella
group, NRF also represents more than 100 state, national and international
retail associations.
www.nrf.com.
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