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ARLINGTON, VA -- The effort to reform what critics call abusive credit-card company practices is now sweeping across America with 17 bills introduced this year in 10 states, targeting excessive, hidden interchange fees and other practices that cost consumers and retailers tens of billions of dollars a year, according to a Food Marketing Institute (FMI) review of state legislation.
"Retailers welcome state scrutiny of credit-card company abuses, especially measures to require full disclosure and reduce interchange fees," said FMI president and CEO Tim Hammonds. "For too long, Visa, MasterCard and their card-issuing banks have fixed interchange fees under the cloak of secrecy."
"The predictable result: The cost of interchange now dwarfs that of all other credit card fees. State action against these outrageous practices reinforces the need for rigorous investigations by the U.S. Congress."
The following is a list of states involved:
-- State assemblies in Florida, Kansas, Nevada, New York and Washington are considering bills to ban interchange fees on the sales tax portion of any retail transaction.
-- Proposed laws in Nebraska and Texas would require card companies and banks to fully disclose their operating rules and interchange fees. A bill introduced in Kentucky would extend the disclosure requirement to all charges and fees before consumers open a credit-card account.
-- Legislation pending in Tennessee would limit interchange fees to 0.75 per transaction and in Washington to 1.5 percent of the transaction.
-- An Oklahoma bill would prohibit "chargebacks," in which banks and card companies retain all the funds from transactions that exceed a preauthorized amount, leaving retailers without the products and the money the customer paid for them.
Congress began investigating this issue last year in hearings before the House Subcommittee on Trade and Commerce and the full Senate Judiciary Committee, according to FMI. The issue of excessive and hidden interchange fees was raised at recent hearings on abusive credit-card company practices by the Senate Banking Committee and Permanent Subcommittee on Investigations. Both panels have indicated they plan to hold hearings on interchange fees later this year.
Credit-card companies and banks extract an interchange fee averaging about 2 percent from every credit- and signature debit-card transaction. Most consumers are unaware of this practice even though interchange fees cost $36.3 billion in 2006, nearly double the amount collected by Visa, MasterCard and their card-issuing banks as recently as 2002, the report stated.
In the long run, retailers are forced to build these fees into the cost of all transactions because card company rules prohibit surcharges on plastic payments and effectively prevent retailers from offering discounts to consumers who pay by cash or check, according to the report.
FMI is a leading member of the Merchants Payments Coalition, which is fighting for fair and transparent interchange fees. For more information about the proposed state laws, visit the listing at href="http://www.unfaircreditcardfees.com/uploads/State-by-State_Interchange_Activity.pdf">www.unfaircreditcardfees.com/uploads/State-by-State_Interchange_Activity.pdf.