Legislation in defense of merchants

[img_assist|nid=8043|title=|desc=|link=none|align=left|width=98|height=100] Credit Card Fair Fee Act of 2008 introduced by US Senator Dick Durbin to "safeguard consumers and retailers by preventing credit card companies from using their market power to charge unfair fees through an unfair process" put MasterCard and Visa under great pressure.

Durbin’s bill is practically replicating the same act of the House version introduced by US House Judiciary Committee chairman, John Conyers, in March.

At the moment of all the transaction fees charged to merchants 90 percent are made up by interchange fees. The rates are specified by the credit card companies mainly by Visa or MasterCard. The average fee rate is 1.75 percent of the overall purchase price. Two years ago more than $36 billion was collected by Visa and MasterCard banks in interchange fees which are 17 percent up over 2005 and 117 percent from 2001. Last year the fees amounted to $42 billion.

Durbin says that at present time there is no "meaningful competition or negotiation" over the fees.

"Interchange fees need to be fairly and transparently negotiated between the merchants and the credit card companies who represent the banks' interests so working Americans don't get shortchanged," he states.

Durban’s bill enables retailers to participate in collective negotiations with the providers of electronic payment systems that control least 20% of the market.

In case financial institutions don’t come to a voluntary agreement, a three-judge panel appointed by the Department of Justice and the Federal Trade Commission would impose rates.

"We welcome this effort to stop the price-fixing and create a transparent market-based process for credit card interchange fees," adds Hank Armour, chairman and CEO of the National Association of Convenience Stores (NACS).

"This legislation is an approach to fix the broken system through a competitive market outcome by allowing merchants a seat at the negotiating table."