New legislation would allow merchants to negotiate fees…

The Credit Card Fair Fee Act, introduced in Congress this month by House Judiciary Chairman John Conyers of Michigan, Utah’s Rep. Chris Cannon and 11 additional members of Congress, would allow retailers and businesses to join together and negotiate better interchange fees. Banks currently set the interchange fee, which is paid by the merchant for every Visa and MasterCard transaction (American Express and Discover use a different model.) With the current system, banks determine interchange fees, which many feel are spiraling out of control. Allowing businesses to negotiate the fee may offer a more competitive rate.

According to Conyors, the bill is not an attempt to regulate the industry or mandate any specific outcome. “This legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees,” he said. The current system is “anti-competitive and secretive. This bill does not set prices,” he added. “Instead, it would require that fees be set in a transparent manner, so other companies can compete for business and consumers would not pay artificially high rates.”

Strong objections from the credit card and banking industry claim the bill is a way to control prices for businesses. Consumers would not necessarily benefit because nothing in the legislation says the merchants must pass their savings along in lower costs to consumers.

“The government wants to come in and fix something that’s not broken,” Howard Headlee, president of the Utah Banker’s Association said. “If the government gets involved, the cost of the system is only going to go up. More regulation does not lower costs.” Visa and MasterCard have their merchant guidelines and a list of interchange fees available online, and merchants have the option of charging people less who pay with cash.

* Learn more about the Credit Card Fair Free Act, H.R. 5546 >

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This entry was posted on Monday, March 24th, 2008 and is filed under: Credit News. Follow through RSS 2.0 and please feel free to leave a response or trackback.