In an article titled "In Australia, Curbs on Credit Card Fees Backfired", Keith Bradsher writes for the New York Times about the adjustments to payment card interchange fees made several years ago in Australia by the Reserve Bank of Australia.

Bradsher notes: "Now, as Congress debates how to rein in credit and debit card companies in the United States, Australia’s experience is being pointed to as an example of just how tricky that can be: for one thing, if regulators limit one fee or rate, banks are likely to find another way to keep revenue flowing."

The National Association of Convenience Stores (NACS) released the following statement in response to today's release of the U.S. Government Accountability Office (GAO) report, "Credit Cards: Rising Interchange Fees Have Increased Costs for Merchants but Options for Reducing Fees Pose Challenges."

"The GAO confirmed key problems that we have raised about credit card interchange fees, also known as 'swipe' fees," said Lyle Beckwith, NACS senior vice president of government relations. "They found that the 10 largest banks have a stranglehold on this market, have used it to raise their fees, which all consumers pay, and that small businesses and low-income, cash-paying consumers get the worst deal from this arrangement."

"And though Visa and MasterCard claim that swipe fees have not been increasing, and that credit card use increases sales for merchants, the GAO report solidly debunks both of those claims," said Beckwith. "The GAO report should sound the alarm that it is time for Congress to reform swipe fees."

The GAO report confirmed many of the most harmful aspects of unfair, hidden fees swipe fees that are incurred every time a consumer pays by debit or credit card. The report shows that the credit card companies and their issuing banks mislead the public about their increasing rates and about the benefits of credit cards to businesses. The report also outlines an unfair, anti-competitive system that hurts Main Street businesses and their customers in order to pad the banks' bottom lines, with little relation to the actual costs of processing payments.

The report makes it clear that, unless Congress acts to bring competition and transparency into the interchange system, the big banks and credit card companies will keep lining their pockets at the expense of small businesses and consumers nationwide.

The Electronic Payments Coalition has issued the following statement in response to today's release of a report on interchange fees from the Government Accountability Office:

Today's GAO report concludes that consumers could be harmed if Congress acts to lower what merchants pay to accept debit and credit.

As the GAO noted in its report, merchants receive myriad benefits when they accept debit and credit cards, including increased sales and reduced labor costs. But giant retailers have been lobbying Congress to pay less than their fair share, and have their customers pay for these fees instead.

The GAO's report leads to a clear conclusion: current interchange legislation places the needs of giant retailers over the needs of consumers. We urge Members of Congress to protect the interests of their constituents, and to oppose harmful interchange legislation.

The US Government Accountability Office (GAO) has just released a report on interchange fees on payment cards in the US. The report, titled "Credit Cards - Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges", is available for download on the GAO's website.

READ MORE »

In an article in today's American Banker titled "Return of an Interchange Firebrand", Maria Aspan interviews Lloyd Constantine, the lead attorney who represented Wal-Mart and other merchants in the largest class action settlement in history involving debit card interchange fees.

Constantine's new book, Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel, was recently published by Kaplan and has been on the must read list for payments geeks like ourselves!

Aspan writes that Constantine finds current interchange-related lawsuits to be "lawyer-driven cases" - while his wasn't. As for the current legislative efforts in Congress to reform interchange, Constantine says he thinks those efforts are "well founded."

In an article titled "Merchants fight for lower credit-card swipe fees", Aldo Svaldi writes for the Denver Post about merchants "revolting against the credit- and debit-card providers their customers rely on to pay them."

"We are under pressure to be as efficient as we can be to keep our prices down," said Bill Cook, owner of Howard Lorton Galleries in Denver. "The credit-card industry doesn't appear that way. They appear to have a cartel."

In an article titled "Visa Plasters D.C. with Ads as Debate Heats Up", Maria Aspan writes for the American Banker about Visa's new "reputation campaign" launched earlier this week in Washington, DC intended to "highlight the benefits of plastic over checks and cash."

The Electronic Payments Coalition has commented on the legislation pending in the US House that would impose new limits on interchange fees and practices.

"H.R. 2382 is one of the most egregious assaults on consumer protection that this country has seen in some time. Disguised as a measure to allow for cash discounts - something that is already allowed by federal law and by all card network contracts - the bill would instead open up the door for bait-and-switch advertising schemes, charging additional checkout fees at the register, and discrimination against certain card holders. The bill is chock full of provisions that mean one thing: consumers will pay more so merchants can pay less. Bottom line - retailers don't want to pay their fair share for a service that brings them more sales and higher profits - and want their customers to pick up the tab instead." READ MORE »

In an article titled "Two sides to every story", this week's Economist takes a look at the raging debate in the US over credit card interchange fees - noting that "the tentative evidence from Australia is that caps on interchange fees for retailers have not been offset by any gain in the form of lower consumer prices."

In an article titled "In House, a Bid to Hasten a Credit Card Law", Reuters (via the New York Times) reports that Representative Barney Frank, Democrat of Massachusetts and Chairman of the House Committee on Financial Services believes that "recent actions by credit card issuers prove that lawmakers should move up the date of new restrictions on interest rates and fees." Frank's committee held a hearing on the matter earlier today in Washington - along with a look at credit card interchange fees.

The House Committee on FInancial Services is holding a hearing today on interchange fees - and, specifically, H.R. 2382, the Credit Card Interchange Fees Act of 2009. The website has been updated with today's witnesses and, where available, their prepared testimony.

The US House Committee on Financial Services has scheduled a hearing this Thursday on two pieces of legislation: H.R. 2382, the Credit Card Interchange Fees Act of 2009 and H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. HR 2382 would prohibit interchange differentials between premium and non-premium payment cards, merchant display of prices, etc.

In a press release this afternoon, MasterCard said that "three quarters of respondents in a new consumer survey believe the fees merchants pay for accepting credit cards are just a cost of doing business, and that merchants should pay those fees. These consumers recognize that merchants receive significant benefits from accepting payment cards, and that merchants should pay for those benefits."

MasterCard went on to question 7-Eleven's recent consumer petition campaign that encouraged consumers to support new legislation to regulate interchange fees paid by merchants. READ MORE »

Lloyd Constantine's new book "Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel" will be in stock and shipping from Amazon.com later this week. The book is quite a read - hard to put down - and highly recommended for payments professionals. See Glenbrook's Carol Coye Benson's comments on the book.

7-Eleven has announced that its franchisees and store operators have collected more than 1.6 million signatures in the “Stop Unfair Credit Card Fees” petition drive. 7-Eleven says it believes this marks the largest number of signatures collected for a public policy issue on record.

Thousands of 7-Eleven franchisees across the country asked customers to support their neighborhood stores by signing petitions calling for Congress to pass legislation that prohibits credit card networks and card-issuing banks from charging unfair transaction fees. The signature drive ran from June 22 through Aug. 10 at store counters coast to coast. READ MORE »

The Reserve Bank of Australia has announced that it is "is considering changes to the regulation of interchange fees in the EFTPOS system. The proposed change to EFTPOS interchange regulation is intended to ensure that competition between EFTPOS and scheme debit is conducted on a level playing field. The change does not imply that interchange fees in the different systems should be equal, only that they are subject to equivalent regulation."

The Electronic Payments Coalition issued a press release titled "Consumers Will Be Hurt By Interchange Regulation: 5 Articles of Proof" yesterday responding to pressures for regulation of interchange fees in the US:

"Today, the Electronic Payments Coalition released key evidence from several sources, demonstrating conclusively that consumers would be hurt by interchange regulation in the form of higher fees, fewer benefits, and zero savings at the cash register. Despite the misleading claims of giant retailers who want to shift this cost, merchants themselves have confirmed that they would not pass savings on to their customers." READ MORE »

The Merchants Payments Coalition has published a paper titled “Swipe Fee” Reform – International Lessons that takes a look at interchange fees (so-called "swipe fees" in the group's vernacular) in several markets outside the US. The paper states that "Compared to the rest of the world, U.S. swipe fees are: more than two times the rates in the UK and New Zealand, four times the rates in Australia, and over six times the cross border rates recently agreed upon by MasterCard and the EU."

Visa has released results of a new survey finding that "consumers believe retailers benefit far more from accepting credit and debit cards than they pay in costs." Visa said that the survey also found that consumers believe merchants see card cost acceptance as a part of doing business, much like paying for utilities such as electricity. READ MORE »

In an article titled "Retailers Battle Credit Card Fees", Nancy Trejos writes for the Washington Post about interchange fees. She writes that "the General Accounting Office is doing a study of the fees, as required by a law signed by President Obama in May that bans many unfair credit card industry practices."

She notes that "The Merchants Payments Coalition will release a study on Thursday of how European countries, Canada and New Zealand handle interchange fees."

We'll cover the study here on Payments News when it's released.

Attorney Lloyd Constantine of Constantine Cannon has a new book coming out in early October titled "Priceless: The Case that Brought Down the Visa/MasterCard Bank Cartel".

From the advance material on the book:

Priceless offers readers an insider’s telling of the case that ended with the breakup of the Visa/Mastercard credit cartel and a $3.4 Billion settlement. Lloyd Constantine, founder of Constantine and Partners, the small boutique antitrust firm that could, and lead counsel on the Visa/Mastercard case, takes no prisoners as he tells his side of what happened in this very public lawsuit whose outcome continues to affect economics today."

Priceless is now available for pre-order from Amazon.com.

In a media release today, the Reserve Bank of Australia's Payments System Board announced that at a recent meeting it had considered whether the conditions have been met for the removal of interchange regulation and "was not yet satisfied that such conditions have been met." The Board also said it had decided to defer consideration of any further reduction in interchange fees for the time being. READ MORE »

The Commerce Commission and MasterCard International have announced signing an agreement "settling the Commission’s claims that MasterCard’s credit card scheme rules providing for the payment of multilateral interchange fees, together with related rules, breached the restrictive trade practices provisions of the Commerce Act. The Commission and MasterCard have agreed to resolve the Commission’s claims on substantially the same basis as the Commission’s settlement with Visa, which was announced on 12 August 2009." READ MORE »

The New Zealand Commerce Commission has announced it has "signed an agreement with the Visa International Service Association and Visa Worldwide Pte Limited (Visa) settling the Commission’s claims against Visa in relation to credit card interchange fees. The Commission’s proceedings allege that the rules of the Visa scheme providing for the payment of multilateral interchange fees, together with related rules, breached the restrictive trade practices provisions of the Commerce Act." READ MORE »

In yesterday's MasterCard quarterly earnings call (from the transcript provided by SeekingAlpha.com), MasterCard CEO Bob Selander early on commented directly on the pending interchange-related legislation in the US Congress. He spoke about "the extraordinary value merchants receive, when they accept payment cards" noting that "the average consumer credit charge-off rate as a percentage of point of sale transaction volume is multiples higher than the average consumer credit card interchange rate in [our] system."

On MasterCard's MasterCardNews Twitter feed this morning are several tweets from this morning's MasterCard quarterly earnings call about interchange fees. Included is a link to a MasterCard brochure titled "Benefits of Open Payment Systems and the Role of Interchange" that was originally released back in January.

In an op-ed piece titled "Credit card transactions benefit both merchant and customer" the St. Louis Post-Dispatch, MasterCard's Rob Reeg, president of Global Technology and Operations for MasterCard Worldwide, writes about interchange fees and current efforts by many merchants lobbying Congress to "push for a new law that would shift the fees for using a card onto consumers while merchants keep the benefits, and the profits." Reeg cites the example of the Reserve Bank of Australia's mandated cuts in interchange fees a few years ago - and where, he says, "rather than passing along the savings to their customers, merchants pocketed the funds." He concludes by urging Congress to reject "the merchants' anti-competitive legislation."

In an article titled "Retailers Prepare to Fight Credit Card Fees" in Thursday's New York Times, Andrew Martin writes about how merchants in the US are mounting a "fresh offensive" against payment card interchange fees.

Martin reports that the retailers sense that the momentum has shifted in their favor - while the banks and payment card networks are gearing for a "furious battle on Capitol Hill."

The Consumerist takes note of 7-Eleven's new campaign to get customers to sign a petition to Congress protesting payment card interchange fees. "The vendor of last resort is mad about interchange fees, the fees banks charge merchants for accepting a credit card payment. The recent credit card legislation signed into law protected consumers from rate increases, but stayed silent with regards to interchange fees."

In an article titled "Roping Consumers into Fee Tug-of-War", Maria Aspan writes for the American Banker about 7-Eleven's effort to garner consumer signatures on petitions that will be forwarded to the US Congress as it considers legislation dealing with credit card interchange fees.

Aspan writes that some industry observers feel that the time is right for such a petition drive as "a lot of people are just fed up with credit card companies in general and they're willing to sign anything".