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    Merchants Not Mollified by Visa's Published Interchange Rates

    Visa puts the rates out in the open, but retailers want more information on "excessive" charges.

    WASHINGTON – Retailers were hardly mollified by Visa's public release on Tuesday of its credit card interchange rates. The credit card company's rate structure was barely posted on its web site when Mallory Duncan, chairman of the Merchants Payments Coalition (MPC), issued a request that even more clarity be brought to the complicated credit card environment. Duncan reiterated the coalition's stance that credit card companies have violated anti-trust regulations.

    Duncan, who is also the senior vice president and general counsel for the National Retail Federation, said, "This announcement by Visa begins to shed a much-needed spotlight on the excessive interchange rates merchants and consumers are forced to pay on virtually every credit or debit card transaction."

    He noted the need for even more transparency. "The report shows a bewildering array of rates for different cards, merchants and types of transactions, which emphasizes the opacity of interchange. Without the operating rules that govern how these fees are applied, this announcement falls far short of the disclosure that is required and that Visa promised in testimony before Congress this summer," he continued. "Only when the full picture of the interchange puzzle is complete can Congress decide what further action may be required."

    Duncan also reinforced the coalitions stand: "Our position is clear. The collective setting of interchange fees by Visa and MasterCard violates the antitrust laws and costs merchants and consumers $30 billion a year." He continued, stating that Visa was incorrect in stating that merchants pay a negotiable "merchant discount" fee instead of a full interchange. According to the Merchants Payment Coalition, interchange is a non-negotiable fee paid as part of the merchant discount fee, accounting for approximately 80 percent of the total merchant discount fee.

    MasterCard also agreed to put its rates out in the open in an announcement last month.

    "It is evident that Visa has felt the pressure of congressional scrutiny and merchant outrage over these anti-competitive practices, since as recently as September they maintained that these fees were already available," he added.

    The interchange rates came into the limelight in July, when the U.S. Senate Judiciary Committee held a hearing about antitrust concerns on credit card interchange fees. At the council former NACS chairman Bill Douglass, CEO of Douglass Distributing spoke to the committee about the high cost of interchange rates and the damper they put on the convenience business.

    That hearing was five months after a hearing in which NACS president and CEO Henry Armour testified before the House Energy and Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection on the industry’s struggle with interchange fees.

    Armour also spoke about interchange fees at the NACS Show 2006, held in Las Vegas, from Oct. 8 to 11. There, he reassured attendees that NACS would continue the good fight against interchange fees. "This is the most important issue that the industry has addressed in decades," he said. "The credit card fees we pay are outrageous. The interchange fees we pay are outrageous. The chargebacks are outrageous," he said to near-unanimous applause from the audience.

    Interchange fees are also a concern of incoming NACS chairman Sam Turner. During the closing general session of the NACS Show 2006, he told attendees "I can tell you our agenda won't change. …NACS will continue to protect and defend our industry. No matter which issues come up we'll stay the course and fight for what's right."

    At the session, he compared credit card fees to "walking up to King Kong and pulling a hair out of his chest." He noted that the fees are costing the industry as much as it is seeing in profits. NACS is supporting retailers and has made Capitol Hill aware of the issues surrounding credit card fees, Turner said.

    "Through our efforts, both the House and Senate understand just how outrageous these fees are and that the system is broken," said Turner, adding: "The battle against the credit card companies will be difficult and NACS will push even further and harder in the next Congress."

    The coalition, founded in part by NACS, is composed of 20 trade associations representing retailers, restaurants, supermarkets, drugstores, convenience stores, gas stations, on-line merchants and other businesses that accept debit and credit cards. It is fighting for a more competitive and transparent card system. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.

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