WASHINGTON, FEB. 15, 2006 - "In the United States alone, credit cards, ATM cards, and debit cards accounted for almost 42 billion transactions worth almost $3 trillion in 2004," stated Rep. Cliff Stearns (R-FL), Chairman of the Commerce, Trade & Consumer Protection Subcommittee. "This hearing focused on the fee structure that makes these transactions possible. Interchange fees are what merchants pay for access to the extensive, global electronic payments infrastructure. However, as these fees increase, many merchants believe that this increase is rising faster than the associated costs, resulting in some charges of collusion and anti-competitive practices. My interest is to examine if the current system is functioning properly and efficiently; offering choice and transparency."
Testifying on behalf of the National Association of Convenience Stores, an industry with 140,000 stores in the nation, the organization's President & CEO Henry Armour noted that interchange fees "have now escalated to the point that they are the third highest operating cost to my industry - behind only rent and payroll." He further stated that these fees "are bad for our customers. Right now, credit card companies charge about 5 cents in interchange on a gallon of gas."
Critics of the system also stated that it raises costs for all consumers, not just those who use credit cards. Edmund Mierzwinski, Consumer Program Director with U.S. Public Interest Research Group, testified, "Many of the estimated 10-12 million consumers who do have credit or debit cards are unbanked due to the high costs of maintaining a bank account, yet these lower-income Americans are also paying more at the store and more at the pump due to high interchange fees."
The former Chairman of the Federal Trade Commission, Timothy Muris, testified for the Electronic Payments Coalition. He stated, "Credit cards can be a superior form of credit for some consumers. Credit cards are clearly superior to and less expensive than traditional forms of credit such as pawnshops, payday lenders, and borrowing money from family and friends. Today, most adult Americans can obtain a revolving line of credit."
In response to suggestions that Congress look at capping interchange fees paid by merchants, Karen Kerrigan, President & CEO of the Small Business & Entrepreneurship Council, stated, "From the SBE Council's perspective, the market has worked extraordinarily well in developing and sustaining a complex and secure payment system that everyone is benefiting from. In the end, the SBC Council is very concerned that both consumers and small businesses will pay a price for government intervention."
Concluded Stearns, "The interchange fee is part of the terms of the credit card agreement made with merchants. Currently, there are some 47 class action lawsuits filed by merchants against the payment association regarding the interchange fees. For now, I will follow the progress of these lawsuits and continue to review the current system's openness to competition."
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