Bill introduced to check credit card fees

WASHINGTON A measure introduced in the U.S. House of Representatives would enable restaurateurs and other retailers to negotiate lower transaction fees with individual credit card companies.

At present, the fees are virtually the same across many of the credit card companies, and restaurateurs complain that the charges are often presented as a take-it-or-leave it option.

Sponsored by House Judiciary Committee Chairman John Conyers, D-Mich., and Rep. Chris Cannon, R-Utah, the Credit Card Fair Fee Act, or HR 5546, is seen by proponents as a way of reining in the so-called interchange fees, which many in the industry complain are out of control.

Critics of the interchange fee Ñ a charge used to cover the cost of processing credit card transactions and the risk taken by issuing banks -- argue that it has been steadily rising over the years as processing expenses have been decreasing. Interchange fees average about 1.75 percent of a credit card purchase, with the merchant paying the amount.

"Many of our members have expressed concern about the unexplained increases in fees and inability to negotiate a fairer rate with credit card companies," said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association. "The Credit Card Fair Fee Act is a solution to an issue that poses a burden to small businesses, including restaurants, around the country."

The NRA is a plaintiff in a lawsuit claiming that MasterCard, Visa and others are violating federal antitrust laws by imposing interchange or "hidden" fees on foodservice operators. The suit argues that Visa and MasterCard set fees arbitrarily and "without apparent respect to the typical market forces."

In introducing his bill, Conyers told House members it "would help level the playing field for merchants and retailers negotiating with banks for the cost of certain feeds, and ultimately reduce the costs of everyday goods for consumers."

Conyers said that interchange fees in 2006 totaled about $36 billion, an increase of 117 percent since 2001. In 2007, fees were $42 billion, an increase of 17 percent over the prior year.

"Merchants are forced to deal within this system because it is simply not an option to refuse to accept Visa or MasterCard from their customers," he said.

Conyers said that Visa and MasterCard account for more than 73 percent of the volume of transactions on general purpose cards in the United States and about 85 percent of the cards issued. American Express, Discover and other credit cards use a different model.

Mallory Duncan, chairman of the Merchants Payments Coalition, of which the NRA is a member, said, "We welcome this effort to stop the price-fixing practices of the credit card industry and create a transparent market-based process."

In a statement concerning the bill, MasterCard said it "believes there is no need for government intervention, and that it would be inappropriate for the U.S. government to set prices and negotiate the terms of contracts for private commercial entities."

Peter Madigan, executive director of the Electronic Payments Coalition, which includes Visa, MasterCard, Bank of America and others, agreed that the bill would not help. He contends that the volume of people using credit has risen, not the interchange fees, which has resulted in an increase in fees paid.

Mike Shutley, the NRA's director of legislative affairs, argued that interchange fees have indeed risen.

"But, really, they should be going down," he said. "The technology [used to process the transactions] has been improved."

Shutley added that only 13 percent of the interchange fee goes to covering the cost of the transaction.

If the measure were enacted, Shutley said, restaurateurs and other businesses could form a broad coalition and negotiate fees as a group. But if, for instance, an individual operator were dissatisfied, he could opt out and negotiate for himself.