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    Okla. Representative Brings Interchange Fees onto a State Level

    House Study Proposal 7121 goes before state committee to increase awareness.

    OKLAHOMA CITY -- State Rep. Ron Peterson (R-Broken Arrow), brought a study proposal before the state House Economic Development and Financial Services Committee last week, in efforts to examine "credit-card fees and other chargeable fees placed on merchants," the Journal Record reported, citing the study.

    House Study Proposal 7121 called for testimony from various players in the industry, including a regional convenience store chain, the state's petroleum marketer's and convenience store association and financial companies.

    Interstate commerce laws prohibit the Oklahoma Legislature from altering the interchange fees that state merchants pay for credit card acceptance, the report stated. However, lobbyist Vance McSpadden told the paper the Oklahoma Petroleum Marketers & Convenience Store Association wanted the state's lawmakers to be aware of the issue. The issue has been addressed on the federal level with both legislation and litigation, he added.

    Also asked to testify was Steve James, chief financial officer for OnCue Marketing, who also owns the 34-store chain of OnCue Express convenience stores, which are located in Oklahoma and Kansas.

    "Credit cards are our No. 3 expense, right behind labor and occupancy, or rent," he said. "I never saw this 10 or 15 years ago. In our case, it's a little over $2 million a year in credit card fees that I pass on to our customers. It ends up getting passed on to your constituents in higher gasoline prices."

    James explained that while interchange fees usually total approximately 2 percent of a transaction, some purchases can charge as much as 8 percent. For example, when a card's magnetic strip is damaged and the establishment has to use a key pad to complete the transaction, the retailer is charged a higher percentage, the report stated.

    "In other countries, particularly in Europe, their credit card fees are 40 to 80 percent less than they are in the U.S.," said James, noting that European customers aren't offered rewards for using credit cards.

    While some convenience retailers are permitted to offer a discount on cash transactions, James said his fuel supplier, ConocoPhillips, prevents him from doing so, the report stated. In addition, some credit card companies imposed limits on gasoline purchases, allowing them to purchase only $50 to $75 at the pump in one transaction, the Journal reported.

    Also called to testify was Myrna Kay Smith, vice president of government relations for the Oklahoma Banking Association. Smith said fees are a cost of doing business, and merchants can negotiate a better price with the company contracted to handle the retailer's credit card sales, the report stated.

    Smith added that the high profits being made by credit card companies is largely due to the increasing use of the cards -- such as purchasing items on the Internet 24 hours a day -- which puts greater demands on credit card companies' infrastructure.

    In addition, the free market controls fees, and retailers that don't receive an added sales benefit by accepting credit cards are not required to continue, said former legislator James Newport, of Tulsa, Okla.-based lobbying firm Kelley & Associates, which represents JPMorgan Chase, the report stated.

    "No one holds a gun to anyone's head and says you have to use a bank card at your establishment," said Newport. “It’s a convenience we’ve all come to know and expect, but it is voluntary."

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