Credit Card Company Contracts in Jeopardy
New Senate bill may lift constraints imposed on merchants…
Consumers may see retailers offering discounts for purchases made with cash or check. Proposed changes included in the sweeping bill that is awaiting Senate approval would lift constraints imposed on merchants’ ability to offer discounts for paying with cash by Visa, MasterCard and other credit card networks. Many retailers will be happy for the opportunity to offer transparency to their customers about the fees that are paid to credit card companies - fees amounting to tens of billions of dollars each year.
Retailers have struggled with the unfair practice that penalized customers who pay cash for their purchases while paying for a share of the cost for customers who buy on credit. The new law would allow discounts for debit cards and ban retaliation against retailers who charge less for transactions that don’t involve credit cards. Mallory Duncan of the Merchants Payments Coalition, a group that includes retailers, says the proposal “is really about giving consumers the same rights to shop for the best bargains as they do with everything else in the store.”
Credit and debit card purchases cost retailers between 1% to 2% per purchase. Although the law allows merchants to charge less for cash, credit card company contract requirements make it difficult. Merchants are required to post two prices on every product, if they want to charge more for credit card use, and the credit card price must be more prominent. Merchants face penalties if they fail to follow the contract. “The extra charges the establishment has to pay for the use of a credit card are kind of hidden inflaters in the cost of the product,” said Sen. Richard Durbin, D-IL, who is pushing the measure with Sen. Christopher Bond, R-MO.
Pressure from the financial industry could force lawmakers to shelve the measure to avoid sinking the broader bill. Credit unions and small banks stand to lose revenue, if the new law passes and are pushing back particularly hard, along with the rest of the credit card industry. Retailers seeking the change “do not want to pay their fair share for the significant benefits they get when accepting debit and credit,” said Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a group representing bankers and credit card networks.
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