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Credit card transaction fees paid by c-store retailers last year increased by $1 billion, or 15.2 percent, to $7.6 billion, according to recently released data from NACS. At the same time, the industry's pretax profits dropped by $1.4 billion to $3.4 billion; meaning the industry pays more than double its pretax profits to the credit card industry.
NACS chairman Richard Oneslager was right to wonder recently why the federal government reserves its scrutiny for such key c-store product categories as motor fuels and tobacco, but continues to ignore the impact of rising credit card fees. I'm convinced there'd be a much greater uproar if consumers only knew how much of the price of gas, food and other merchandise went to credit card companies instead of their local retailer. But retailers are not even allowed to show customers this amount on their receipts due to contracts with the card companies, according to The Merchants Payments Coalition, a retailer advocacy group representing supermarkets, drug stores, c-stores and other retailers. More importantly to retailers, though, is the credit card companies' refusal to negotiate the fees and their monopoly-like market dominance.
Even last month, when Visa and Mastercard, which account for roughly 80 percent of credit cards issued, agreed not to increase their rates, retailers were hardly doing cartwheels. "Simply holding them at current levels is not a sign of good faith," Mallory Duncan, general counsel for the National Retail Federation told the Associated Press. The NRF and NACS are both members of The Merchants Payments Coalition. "True competition would drive the fees down," said Duncan.
While there are still several retailer-backed lawsuits against the banks and credit card companies pending, it appears that the best chance for driving down fees lies in passage of legislation introduced in March by Reps. John Conyers (D-Mich.) and Chris Cannon (R-Utah). House Bill 5546, The Credit Card Fair Fee Act, requires that card companies negotiate transaction fees with merchants. If an agreement couldn't be reached, then a panel of judges would set the interchange fees.
The credit card companies have already attacked the bill. They defend the fees as appropriate considering what they provide in convenience and security of credit card transactions. Banks also take the hit when consumers don't pay their credit card bills. They also say HR 5546 would be the same as instituting government price controls. In other countries where rates have been capped, consumers receive fewer rewards and additional surcharges, they claim. But The Merchants Payments Coalition points out that American consumers pay among the highest credit card interchange fees in the industrialized world.
The NACS chairman, who is also president of Balmar Petroleum/First Hand Management LLC, feels so strongly about the bill that he called on every c-store retailer to write a check to the NACS Interchange Action Fund, for any amount, although he suggested retailers could calculate their donation amount by multiplying their number of stores by $180.
Imagine if every company followed Oneslager's advice. With the industry store count currently at 146,294, we could see $26.3 million pour into the lobbying efforts on behalf of this important legislation. Just a 1 percent decline in the yearly expenditure for credit card fees could save the industry $76 million on the bottom line. So the investment is pretty small considering what is to be gained.
And, considering the formidable resources of the banks and credit card companies, every penny will be needed.