| Disclosure note: I'm working with UnfairCreditCardFees.com to help raise awareness about the interchange fee. This is an updated version of a post that has appeared on other progressive sites.
Not familiar with the interchange fee? That is probably because Visa and MasterCard want it that way, seeing as how they control more than 80% of the market and wrote rules that make it virtually impossible to tell consumers how much interchange fees cost them. Whether you're from New Jersey or anywhere in the US, this is an issue that affects us all.
The interchange fee is a percentage of each transaction that Visa and MasterCard banks collect from merchants every time a consumer uses a credit or debit card to pay for a purchase. If you're curious the cost was more than $30 billion in 2005, more than late, annual and cash advance fees combined. Additionally, interchange fees cost the average American family hundreds of dollars per year. In fact as this consumeraffairs.com article highlights,
Interchange fees are often so high that merchants lose money on plastic transactions, particularly for `micropayment' purchases such as food. Because retailers are barred from offering discounts for buying with cash, the end result is that prices go up for all the goods they sell, and consumers never know why. |
| Luckily there is good news as you may have heard about Sen. Chris Dodd's efforts to expose predatory lending practices in the Senate Banking Committee. In addition, two weeks ago Sen. Levin shed further light on the credit card industry in a hearing entitled, "Credit Card Practices: Fees, Interest Rates, and Grace Periods." According to the Senate Homeland Security & Governmental Affairs Committee website :
It is the first of several Subcommittee hearings that will examine a variety of credit card practices that raise concerns. This hearing will focus on how credit card issuers apply interest rates and fees to consumer accounts. It will examine, for example, how credit card issuers select and apply interest rates and, for consumers carrying a balance forward, eliminate grace periods for repaid debts. It will also analyze high fees charged for late payments, over-the-limit charges, and other matters, including how those fees are assessed, how they add to interest costs, and how they contribute to consumer debt. In addition, the hearing will examine an industry practice requiring consumer payments to be applied first to balances with the lowest interest rates instead of to balances with the highest interest rates. The hearing will draw, in part, from a September 2006 GAO report detailing the finance charges, fees, and disclosure practices associated with 28 popular credit cards.
According to an American Banker article (that is behind a pay door), the credit card companies are none too happy about this increased negative exposure and are worried about the fallout coming from this increased scrutiny coming from Capitol Hill.
Lobbyists said they worry that the hearing - featuring witnesses from Citigroup Inc., JPMorgan Chase & Co., and Bank of America Corp. - will draw significant negative press attention, putting a dent in their reputations and pressuring other lawmakers, like Senate Banking Committee Chairman Chris Dodd, to act. [...] Publicly, industry representatives said their hope is to try to rebut any charge that credit card companies routinely use unfair or deceptive practices. [...] But privately, industry lobbyists said they know credit card companies are under increasing scrutiny. Sen. Dodd has already promised a series of hearings in the Banking Committee on credit card practices, and several consumer groups are promoting an independent documentary, `Maxed Out,' that chronicles consumer problems with credit card debt.
What was more surprising was the commentary of Republican Sen. Norm Coleman:
I should mention one other industry practice that is not the focus of today's hearing, but is extremely important, and that is the interchange fees charged to merchants by Visa, MasterCard, and other card associations. Interchange fees can significantly impact the prices charged by merchants and retailers, many of whom already operate on extremely thin profit margins. Ultimately, it is the American consumer who bears the cost of these interchange fees, but local retailers also feel the squeeze as they compete with larger company's that can spread these costs over a broader customer base. As the Subcommittee continues its investigation of the credit card industry, this important issue should be one of the continued subjects of our inquiry.
Wow. Guess Al Franken has already had an impact!
Hopefully these hearings and the efforts of Senators Levin and Dodd can serve to raise awareness amongst not only other lawmakers but also consumers whom the credit card industry has intentionally kept in the dark for far too long. I would urge all of you to contact Senator Menendez , who sits on the Senate Banking Committee, and share your thoughts with him on this issue.
We're working to change things. Stop by our site, have a look, and get yourself educated. Thanks. |
