FMI Lauds Introduction of Bipartisan Bill to Abolish Anti-Competitive Credit Card Company Practices; Measure Empowers FTC to Eliminate Abuses That Inflate Interchange Fees

ARLINGTON, VA — May 13, 2009 — The Food Marketing Institute (FMI) praised legislation introduced today by U.S. Reps. Peter Welch (D-VT) and Bill Shuster (R-PA) that would eliminate credit card interchange fee abuses.

The legislation, titled The Credit Card Interchange Fees Act 2009 (H.R. 2382), empowers the Federal Trade Commission (FTC) to investigate credit card rules and practices that inflate interchange fees and eliminate those deemed anti-competitive.

“By eliminating the most onerous of the nearly 1,100 pages of rules, the Welch-Shuster bill would help restore fairness and competition to the broken interchange fee system at a time when American families are counting pennies and need economic relief. American businesses and consumers today are paying nearly $50 billion a year for hidden fees that are fixed by credit card companies and banks,” said Jennifer Hatcher, FMI group vice president of government relations.

The legislation, similar to a bill Welch introduced last year, will, among other provisions:

Prohibit higher fees for premium credit cards, such as rewards, corporate or internationally issued cards.

Eliminate card company rules that effectively prevent retailers from offering discounts to consumers who use less costly payments, such as cash, checks and cards with lower interchange fees — similar to an amendment to the Credit Cardholders’ Bill of Rights Act, currently on the Senate floor, proposed by Dick Durbin (D-IL) and Kit Bond (R-MO).

Outlaw the Honor All Cards rule, allowing retailers not to accept credit cards that have especially high fees.

Require full disclosure of interchange and other merchant fees and credit card company rules to the Federal Reserve and public.

Barrow (D-GA), Christopher Carney (D-PA), Keith Ellison (D-MN), Steve Kagen (D-WI), Zoe Lofgren (D-CA) and Todd Russell Platts (R-PA).

Credit card companies and banks extract an interchange fee averaging about 2 percent on every credit card transaction. The total cost of interchange fees tripled since the beginning of this decade, from $16.6 billion in 2001 to $48.8 billion in 2008, according to the Merchants Payments Coalition and data from The Nilson Report. The average American household paid more than $400 in interchange fees last year.

Many other fees are assessed on each transaction, including access fees, processing fees, switch fees, risk fees, dues and assessments — all of which, like interchange, are hidden from the consumer. The Welch-Shuster bill would require the FTC to review these fees as well.

FMI is a founding member of the Merchants Payments Coalition, a group of nearly 100 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, online merchants and other businesses that accept debit and credit cards. The MPC is fighting for a more competitive and transparent card system in which interchange fees are based on actual transaction costs. The coalition’s member associations collectively represent about 2.7 million stores with about 50 million employees.