Posted on 03/06/2008 2:42:54 PM PST by hardknocks
WSAHINGTON DC – Congressman Chris Cannon (R-UT), along with Judiciary Chairman John Conyers (D-MI), today introduced the “Credit Card Fair Fee Act” (HR 5546) to address the anti-competitive aspects of credit card interchange fees and save American consumers and American families billions every year. Upon introducing this legislation, Congressman Cannon said,
“Free market capitalism is the most successful economic system the world has ever witnessed. Bedrock principles of that system include transparency and competition. The current system of setting fees that merchants pay for credit card transactions is anti-competitive and secretive. This bill does not set prices. Instead, it would require that fees be set in a transparent manner so other companies can compete for business and consumers would not pay artificially high rates.”
Cannon continued, “In the end, credit card companies should set whatever fees the market will tolerate. This bill is a win for consumers, for retailers, and for the credit card industry which will benefit from competition.”
In closing, Congressman Cannon said, “This is a complicated issue. This bill may not be the final answer, but society’s interest in this is so great that we hope all interested parties will come to the table.”
For more information, please visit: http://chriscannon.house.gov/ChrisCares/CreditCards.htm
For a graphical depiction of how this bill would mandate negotiations, please visit: http://chriscannon.house.gov/UploadedFiles/ccflow.pdf
Each year, consumers pay billions of dollars in hidden fees that never appear on their monthly statements. Those fees are called “Interchange fees.”
Credit card companies and their banks charge them to store owners, businesses, or anyone else anytime a credit card is used to make a purchase. As much as $2 of every $100 you spend goes to interchange companies or the banks behind the card.
Last year, more than $36 billion in interchange fees were collected, up 17 percent from 2005 and 117 percent since 2001. The average American family is now paying more than $300 a year in credit card interchange fees. Retailers then pass along the credit card interchange fee to consumers in the form of higher prices. The credit card interchange fee increases the price of everything consumers buy, even those who don't use plastic and choose instead to pay for their purchases in cash or by check because retailers are not allowed to offer lower prices for cash or debit transactions because of their agreements with Visa and Mastercard.
For example, with the price of gas at more than $3 a gallon, credit card companies and their banks are collecting as much as 8 cents a gallon in interchange fees. Americans are paying the highest interchange fees in the world, an average of two percent, compared with less than one percent in most other industrialized countries.
Credit Card fees have a complex pricing structure, which depends on the card association, the type and size of the merchant, the type of credit card and the type of transaction. Convenience stores, supermarkets, warehouse clubs and other merchants that sell low-margin items may have lower rates. Hotels and car rental businesses have higher rates. Among transactions, those with a credit card have higher rates than those with a signature debit card, whose rates are in turn higher than PIN debit card transactions. Sales that are not conducted in person, such as over the phone or Internet, have higher interchange rates, apparently due to their increased risk of fraud.
The retailer should be “allowed” to charge more for credit card transactions.
The current law that prevents this is illegal, so quotes around allowed.
From the linked pdf page, it appears that this bill mandates that one collective bargaining agreement over fees between all merchants and all credit card companies, to be determined by the judiciary if no “voluntary” agreement is forthcoming.
Think about the games that would be played under such an arrangement. There’s nothing free market or competitive about this; it’s literally classic fascist economics, straight out of the 1930’s. I’ve always known that Conyers was a liar and an idiot. It now appears that Cannon is a liar and an idiot, as well.
I’m amazed at how many here didn’t read the article. The ones currently getting screwed are those that pay cash, write checks, or use atm cards. They are paying for the credit card fee so folks can use credit cards. I’m also amazed at the number of folks who seem to think using a credit card is solely related to using credit or running into debt. You can pay it off every month.
In today’s world, while that may be technically true, in all reality you would kill the business. Could you imagine telling a gas station in 2008 to just deal with it and not take credit cards? It can’t be done, especially if they’re not part of a chain.
Not very wise money management. It's better to use a credit card and just spend what you realistically can, paying it off each month. That way you get the protection of the Fair Credit Billing Act (law)*.
I got a $2,500 computer for free when a company tried to rip me off. Had I used a debit card, I would have been out of luck. (Plus, I would have been fighting to get my own money back, rather than fighting against them trying to fraudulently have me turn over money.)
Also, liability protection from fraudulent use of a card is different for debit cards (under The Electronic Fund Transfer Act*).
But that's okay....suckers who fall for the debit card scam make banks a LOT of money (why do you think they advertise them so much?) And if suckers are paying the extra fees with limited protection, then there's less of a need for banks to charge me as much to be competitive.
*Of course, IANAL, and this isn't legal advice. :-)
Friggin asshats, the whole lot of them!!
“Free market capitalism is the most successful economic system the world has ever witnessed. Bedrock principles of that system include transparency and competition.”
Yes it is.
And the idea that government regulation can improve on market-oriented solutions that evolve naturally in the free enterprise system are as appealing, mythical and realistic as unicorns.
In before the resident Presumptuous Ones jump in with “I pay my balance in full every month!”
Quite true, it is all a voluntary process. Also dont forget the companies are also offering collateral free loans that they risk being stiffed on. The fees they charge heps cover these losses. Cut the fee they charge and something is going to give, most likely they are going to cut back on the risky loans they make, Women, Minorities and Children hit hardest, thanks Conyers.
There are fees the merchant must pay when you use your debit card also.
The legislation is stating it is quite ok to charge the fee, just make all fees associated with transactions transparent so that the market is competitive.
I have no problem with this at all.
We put everything we can on our AMEX that we get cash back on. We pay it off at then end of every month. If they don’t take AMEX and we have to use them when we present our debit card we ALWAYS tell them credit. That makes the transaction fee go to the store, if you say debit some stores will automatically charge you with a transaction fee. Seeing it less and less, but also by opting for credit (on the debit card) you do not have to enter your PIN and there is less chance of someone seeing you enter it.
That's because you read (and understood) the article. What's wrong with you anyway? ;-)
From the link:
“The facts:
• The courts have decided that Visa and MasterCard have market power. In fact, a report from the Kansas City Federal Reserve has concluded that merchants cannot realistically refuse to accept Visa and MasterCard.
• Bargaining power is so overwhelmingly tilted to Visa and MasterCard that they will not negotiate with merchants. Theirs are “take-it-or-leave-it” offers. Merchants can talk directly with American Express and Discover to negotiate, but Visa and MasterCard will not talk to merchants.
Summary
Both the Second Circuit Court of Appeals and the U.S. District Court for the Eastern District of New York have in the last few years found that Visa and MasterCard have market power. The Second Circuit (United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003)) found that Visa and MasterCard had illegally prohibited their banks from issuing American Express and Discover cards in violation of the antitrust laws. This illegal behavior demonstrated the dominance of Visa and MasterCard over their member banks and showed that American Express and Discover do not have a sufficient portion of the market to counter this dominance. Faced with this dominant market position, merchants are given no opportunity to bargain with Visa and MasterCard. This is consistent with the finding in a recent report by the Kansas City Federal Reserve that concluded merchants cannot realistically refuse to accept Visa and MasterCard. F. Hayashi, “A Puzzle of Payment Card Pricing: Why Are Merchants Still Accepting Card Payments?” Review of Network Economics at 172 (March 2006) http://www.rnejournal.com/articles/hayashi_march06.pdf. It is also consistent with the result in the merchants’ litigation against Visa and MasterCard in the Eastern District of New York which resulted in one of the largest antitrust settlements in U.S. history based upon Visa and MasterCard using their market power to tie credit and debit products. See In re Visa Check/Mastermoney Antitrust Litigation, 2003 WL 1712568 at *3 (E.D.N.Y. April 1, 2003).
10
American Express provides a useful contrast to Visa and MasterCard. American Express does not have market power in most merchant categories and two things happen – first, retailers do have some negotiating power and secondly, if they do not like the rates, in many markets, they can choose not to accept the card. In contrast, the market power of Visa and MasterCard prevent them from allowing merchants the ability to negotiate and it also effectively forces merchants to accept the card at any price if they wish to remain in business.”
Judging from the pdf link provided, this bill will end whatever competition now exists. Fees will be set by the courts or their threatened action. The bill is totally anti-competitive.
Next, I suppose, Congress needs to take a look at those pesky ATM fees that banks charge...
/sarc
Do you have a link to the actual legislation?
You're selling, I'm from the government and I'm here to help you and John Conyers has a hand in it?
BS. I'll admit that this won't bother me much one way or the other bacause I use "cash", such as it is, unless it's a dire emergency.
Yeah, temptations. Guess I am sensitive cause i am mad at myself for getting into the credit card thing....yeesh. So frail are we humans.
My doggie is so laughing at me now! she is laying on her back, paws kicking in the air...howling at my vulnerabilities cause I am “The Human” ( so smart)..Ha.
Wanna talk about frail? In two weeks I make the last of SEVERAL YEARS worth of $900 monthly payments to the IRS!!!
Yeah, It’ll be party time at the Robroy mansion...
Yeah HOO! congratulations. Good for you!
The response to your reply depends on certain factors.
What's your doggies credit rating?
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