“Interchange fees can significantly impact the prices charged by retailers, many of whom already operate on extremely thin profit margins. Ultimately, it is the American consumer who bears the cost of these interchange fees,” he said in an opening statement at the hearing “Credit Card Practices: Fees, Interest Rates, and Grace Periods.”
“Interchange is by far the most costly card-based fee paid by Americans,” said FMI President and CEO Tim Hammonds. “It’s also important to know that these fees are fixed in secret by Visa and MasterCard and their card-issuing banks with rules that effectively prohibit merchants from disclosing them to consumers. We applaud Senator Coleman for calling upon the subcommittee to shine the light of full disclosure on out-of-control interchange costs and the broken system behind them.”
Coleman is the third prominent U.S. senator this year to call for the need to investigate interchange fees. “We may need to modify our antitrust laws to stop credit card companies engaging in activities to gouge and jack up prices,” said Ranking Senate Judiciary Committee Member Arlen Specter (R-PA) at a Feb. 21 public meeting with constituents about interchange fees at a Pennsylvania supermarket.
Senate Banking Committee Chairman Christopher Dodd (D-CT) said at a Jan. 25 hearing on credit card practices, “Interchange fees are growing exponentially. These opaque fees — assessed on merchants — are passed on, in part or whole, to consumers who have no knowledge or understanding that a fee is even part of the cost of bread or milk or any other consumer product.”
Interchange fees totaled $30.7 billion in 2005, up more than 17 percent from 2004 and up 85 percent from 2001. They are assessed on every credit and signature debit card transaction, averaging close to 2 percent. In the long run, retailers are forced to build them into the cost of all transactions because card company rules prohibit surcharges on plastic payments and effectively prevent retailers from offering discounts to consumers who pay by cash or check. Credit card company rules make it virtually impossible to inform consumers about these fees.
FMI is a leading member of the Merchants Payments Coalition, which is fighting for fair and transparent interchange fees. For more information, visit the coalition’s new website — www.unfaircreditcardfees.com — which went live today.