Congressmen Conyers and Cannon introduce ‘Credit Card Fair Fee Act’

House Judiciary Committee Chairman John Conyers (D-Mich.) and Rep. Chris Cannon (R-Utah) introduced the "Credit Card Fair Fee Act," legislation that for the first time, they said, deals with “the biggest credit card fee of all” – the interchange fee. They said the interchange fee amounted to $36 billion in 2006.

"We welcome this effort to stop the price-fixing practices of the credit card industry and create a transparent market-based process," said Mallory Duncan, chairman of the Merchants Payments Coalition (MPC) and senior vice president and general counsel of the National Retail Federation.

The bill was introduced March 6.

"This legislation will bring competition to a severely broken system that unjustly inflates the cost of goods and services for all consumers. Virtually every developed economy in the world has found these fees abusive and illegal – even at levels far lower than what Americans pay. We can now work toward a solution where economies of scale, innovation and competition – the forces that drive free enterprise – decide credit card processing fees," said Tim Hammonds, Food Marketing Institute president and CEO, an MPC member.

Currently, credit card interchange rates are set in secret, the MPC said in a statement praising the proposed legislation. Raising interchange fees is how Visa and MasterCard encourage banks to issue more credit and debit cards - as long as rising rates are kept top secret, consumers have no way of knowing the extra costs they are paying through higher prices, the MPC said.

"As entrepreneurs and businessmen, we want market based solutions to our issues," said Richard Oneslager, president of Balmar Petroleum and chairman of the National Association of Convenience Stores, an MPC member. "The Credit Card Fair Fee Act is the free-market solution to the battle over interchange rates."

Interchange fees amount to approximately $2 of every $100 spent using credit cards, the MPC said. These fees inflate the cost of nearly everything consumers buy even when they pay by cash, according to the MPC.

Credit card industry policies and practices make it practically impossible for merchants to know how much they are really paying in credit card fees or why, the MPC said.

"Interchange fees are the biggest credit card fee you've never heard of," said Duncan. The $36 billion in interchange fees paid by retailers and consumers in 2006 dwarfed most other credit card fees put together, including late fees, over-the-limit fees, annual fees and inactivity fees, according to the MPC.

Over the last three years, credit card practices, policies and fees have been scrutinized by the public, consumer groups, the Federal Reserve, and Congress. Interchange fees have been the subject of hearings in recent years under both the Republican and Democratic Congresses.

Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the state of competition in the credit card marketplace, the MPC noted in its statement. The "Credit Card Fair Fee Act" is a direct outgrowth of the Antitrust Task Force's bi-partisan examination into the fees, policies, and practices of the credit card industry, the MPC said.

Bi-partisan co-sponsors of the Credit Card Fair Fee Act include Representatives John Boozman (R-AR), William Delahunt (D-MA), Louie Gohmert (R-TX), Ralph Hall (R-TX), Zoe Lofgren (D-CA), John Peterson (R-PA), Todd Platts (R-PA), Bill Shuster (R-PA), John Sullivan (R-OK), Anthony Weiner (D-NY) and Peter Welch (D-VT) and Joe Wilson (R-SC).

The Merchants Payments Coalition (MPC), UnfairCreditCardFees.com, is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against what it calls unfair credit card fees and for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition said its member associations collectively represent about 2.7 million stores with approximately 50 million employees.