The Credit Battle Continues

A year after 7-Eleven launched its petition campaign against credit card transaction fees, victory is still elusive

In July 2009, CSNews Online reported on 7-Eleven store owners and operators who participated in an unprecedented million-signature petition campaign calling on Congress to reform "unfair and excessive" credit card fees. Saying interchange fees "squeezed American businesses and their customers to the tune of $48 billion in 2008," and revealing that American store owners pay nearly twice as much in transaction fees as they earn in profits, some 6,300 7-Eleven franchisees, licensees and store operators put a copy of the petition at every checkout. By September 2009, the chain collected 1.66 million signatures and presented them to members of Congress.

Since then, Congress, retailers and consumers have been educated about the credit card industry's practices, including how an average of $2 out of every $100 that Americans spend goes to transaction fees. A barrage of advertisements, studies, YouTube videos and more petitions hit the public, as the credit card industry and retailers attempted to sway opinion.

In late February, "The Costs of 'Charging It' in America: Assessing the Economic Impact of Interchange Fees for Credit Card and Debit Card Transactions," commissioned by the Consumers for Competitive Choice, found just 20 percent of interchange fees charged by credit card companies are needed to cover the cost of processing transactions.

Credit card companies, however, contend they are providing a service that some retailers don't want to pay for.

In late April, the c-store industry delivered another 2 million signatures to Congress, and Dave Carpenter, operator of six Shortstop stores and a community bank, told the U.S. House Judiciary Committee interchange is "rigged to guarantee big money for the largest banking institutions" and "tighten the noose on businesses."

Carpenter told Congress the card fees at one of his stores is twice what he pays in rent, four times more than utilities and 30 times more than health insurance. "If interchange fees were half of what they currently are, I could support more than $7.5 million in additional investment capital that I could use to open more stores and provide more jobs in my community. With lower interchange fees, I could also lower prices. And lower prices mean more sales."

In May, after successful lobbying by members of NACS — the Association for Convenience and Petroleum Retailing, and other groups, the U.S. Senate passed to the Restoring American Financial Stability Act of 2010 (S. 3217), directing the Federal Reserve to issue rules ensuring debit swipe fees are proportional to processing costs incurred and preventing card networks from penalizing sellers for offering discounts to customers for using competing networks or other payment methods. It also allows retailers to decline credit cards for small purchases.

At press time, the legislation was working its way through the House/Senate conference. On the state level, however, Vermont passed a bill that allows merchants to set a minimum amount for credit card purchases and prohibits card companies from fining businesses that offer discounts to customers who use credit cards with lower interchange swipe fees. The law goes into effect in January 2011.

For comments, please contact Barbara Grondin Francella, Senior Editor, at [email protected].