FOR IMMEDIATE RELEASE

Bi-partisan Legislation Aims to Reduce Hidden Credit Card Interchange Fee Through Transparency, Market-Based Remedy

Washington, D.C. – March 6, 2008 – Today House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT) introduced the “Credit Card Fair Fee Act”, legislation that for the first time deals with the biggest credit card fee of all – the interchange fee, which grew 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.

"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 and hidden from view. 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 .

“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. These fees inflate the cost of nearly everything consumers buy even when they pay by cash.

With a collective market share of approximately 80 percent, Visa and MasterCard operate like price-fixing cartels, each one imposing oppressive credit card interchange fees and rules on merchants on a ‘take-it-or-leave-it’ basis. 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.

“Interchange fees are the biggest credit card fee you’ve never heard of,” added 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.

Over the last three years, unfair 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 three times in recent years under both the Republican and Democratic Congresses.

Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the lack of competition in the credit card marketplace. 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.

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).

Statement of Rep. John Conyers, Jr.

Introduction of the “Credit Card Fair Fee Act of 2008"

Madame Speaker, today I am introducing the “Credit Card Fair Fee Act of 2008,” legislation that would help level the playing field for merchants and retailers negotiating with banks for the cost of certain fees, and ultimately reduce the costs of everyday goods for consumers. I am joined by Representatives Cannon, Lofgren, Shuster, Weiner, Delahunt, Platts, Welch, Sullivan, Wilson (SC), Gohmert, Hall (TX), Boozman and Peterson (PA).

Every time a consumer uses a payment card – at the mall, at the grocery store, at a gas station, or on the Internet – the merchant is charged a fee. This fee gets divided up three ways – between the merchant's bank, the consumer's bank, and the credit card company. It covers processing fees, fraud protection, billing statements, and other expenses such as system innovations.

Almost 90% of this fee comprises a so‑called "interchange fee," which is the payment made by the merchant's bank to the consumer's bank. The percentage is set by the credit card companies, generally Visa or MasterCard, and averages 1.75% of the total purchase. In 2006, interchange fees totaled approximately $36 billion, an increase of 117% since 2001. In 2007, the fees amounted to $42 billion, about 17% since 2006. These fees are ultimately passed on to all consumers in the form of higher prices for goods and services, whether the consumers purchase these items by credit card, check or cash.

These interchange fees are set by the credit card companies. The two largest, Visa and Mastercard, are associations composed of financial institutions and are owned and controlled by their bank member-owners. Together, Visa and MasterCard control over 73% of the volume of transactions on general purpose cards in the United States and approximately 85% of the cards issued. Banks that are members of the Visa association are often also members of the MaterCard association.

Merchants are forced to deal within this system because it is simply not an option to refuse to accept Visa or MasterCard from their customers. They are presented with take-it-or-leave-it options and are not part of the process by which the fees are set. Moreover, the card systems operate pursuant to comprehensive operating rules approved by the associations’ member -controlled boards, but these operating rules are not accessible by the merchants.

This legislation is intended to give merchants a seat at the table in the determination of these fees. It is not an attempt at regulating the industry and does not mandate any particular outcome. This legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees.

The bill creates a limited antitrust immunity for negotiating voluntary agreements and, if necessary, participating in the market-based proceedings. These market-based proceedings will determine the exclusive rates and terms merchants must pay for a three year term. No other fees, terms or conditions may be imposed on the merchants.

The rates and terms will be determined by Electronic Payment System Judges, who will be appointed by the Department of Justice Antitrust Division an the Federal Trade Commission. The judges will apply a market standard in their determinations designed to replicate the rates and terms of payment that would have been negotiated in a competitive marketplace between a willing buyer and willing seller, both of which have no market power. The judges will have full independence in making all determinations but may consult with the DOJ and FTC on certain matters.