MasterCard: 7-Eleven 'Misleading' Customers on Credit Card Fees

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MasterCard: 7-Eleven 'Misleading' Customers on Credit Card Fees

DALLAS -- MasterCard Worldwide fired back against convenience store chain 7-Eleven Inc. yesterday, stating the c-store operator's recent consumer petitioning against 'unfair" credit card fees was "misleading" to customers, who actually believe merchants should pay the costs of accepting credit and debit cards.

According to survey results released by MasterCard, three-quarters of respondents believed the fees merchants pay for accepting credit cards are a cost of doing business and merchants should pay those fees.

"These consumers recognize that merchants receive significant benefits from accepting payment cards, and that merchants should pay for those benefits," MasterCard said in a statement.

7-Eleven franchisees and store operators collected nearly 1.7 million signatures in the "Stop Unfair Credit Card Fees" petition drive, a figure the company believes is the largest number of signatures collected for a public policy issue on record.

Thousands of 7-Eleven franchisees across the country asked customers to support their neighborhood stores by signing petitions calling for Congress to pass legislation that prohibits credit card networks and card-issuing banks from charging unfair transaction fees. The petition drive ran from June 22 through Aug. 10, at store counters coast to coast, the company reported.

"Consumer response to this grassroots petition drive exceeded expectations," Joe DePinto, 7-Eleven president and CEO, said in a statement earlier this month. "Customers share our frustration over the hidden fees that American retailers and ultimately, consumers are forced to pay. They too, want Congress to take action to regulate these unfair fees, which are the highest in the industrialized world."
Credit card companies typically levy more than $2 in fees for every $100 consumers charge at American businesses, 7-Eleven said. Convenience stores generally have smaller purchases, which typically result in much higher rates.

For example, as a result of the recently published rate hike by MasterCard, if a customer uses a MasterCard Pin Debit card to make a $1 purchase at a convenience store, the charge to the merchant would be 20 cents, or 20 percent of the transaction -- nearly twice the current rate, according to 7-Eleven.

But MasterCard President, U.S. Markets Chris McWilton said: "It's surprising that 7-Eleven, a company that prides itself on convenience, would mount such an aggressive campaign against the most convenient form of payment. Even 7-Eleven itself has said many times that accepting payment cards increases their sales, enhances safety and convenience for store operators, and improves customer satisfaction."

In response, 7-Eleven spokeswoman Margaret Chabris told CSNews Online the c-store chain is "in favor of plastic -- it is a convenience for our customers. We don't oppose transaction fees. We just want them to be fair."

The credit card company called 7-Eleven's petition drive "highly questionable" and said "consumers may have been duped into signing the petition."

While initially many consumers said they would support legislation to regulate merchant fees, that support dramatically shifted to opposition once consumers "understood that it would cost them more through higher fees to use their payment cards," MasterCard said.

"When you look closely at the petition, it looks like 7-Eleven sold consumers a bill of goods by implying consumers would save money if Congress regulates merchant fees," McWilton said. "7-Eleven never mentioned what really happens when you regulate interchange fees, and consumer support for their petition evaporates once they understand its consequences. Congress should not allow 7-Eleven and other merchants to use legislation to shift their costs to consumers."

What's more, by accepting MasterCard and other credit cards, merchants avoid credit card losses and the expense of having their own credit departments.

"When the consumer leaves the store, the merchant doesn't need to worry they will be paid," McWilton said during a press call Tuesday. "The issuing bank pays usually within two days, even if the consumer defaults on their credit card bill."

Shawn Miles, head of global public policy at MasterCard, pointed to Australia's "artificially lowered interchange." Consumers there are "now paying significantly higher fees to use their credit cards and receiving fewer benefits, while no one has found any real evidence that merchants lowered prices. Merchants simply pocketed the savings, and consumers were disadvantaged. None of that, however, was explained in 7-Eleven's petition."

A report on the consequences of the Australian regulation by an economist with London-based economics group CRA International, found fees on some cards have gone up almost 80 percent, benefits have been reduced, and some customers face excessive surcharges when they choose to use their cards, MasterCard said.

MasterCard's recent research found 73 percent of respondents agreed the debate over fees is "really just a fight between merchants and banks."

Two surveys commissioned by MasterCard were conducted by KRC Research. The first was fielded online during the month of August among 1,002 U.S. adults. The second survey was fielded by telephone using a random sample during the month of September among 1,001 U.S. adults.

Among initial supporters of 7-Eleven's petition, three in four opposed the legislation when it would end up increasing the fees they pay for their payment cards, including 55 percent who strongly opposed it, MasterCard said. Almost three in four (73 percent) said the cost of accepting credit card payments is something merchants should pay as part of their costs of doing business. Seventy-one percent agreed it would not be fair for consumers to pay the merchants' cost of operating a credit card system.

Almost three in four (73 percent) agreed that paying for card acceptance is a good investment for merchants because accepting credit cards helps their business.

"Support for 7-Eleven's petition was associated with a fundamental misunderstanding of the impact of reduced merchant fees on consumers," MasterCard said in a statement. "Of those consumers who were inclined to sign the petition, 80 percent mistakenly believed consumers would directly and immediately benefit from a reduction in merchant fees."

Eric Grover, a principal at Intrepid Ventures, a leading payments industry consultancy, said: "In my view 7-Eleven's campaign was willfully deceptive. It invited unsuspecting consumers to petition for government regulation that will cause higher card fees and a reduction of the benefits they take for granted. Would people have signed a petition asking them to pay additional fees on their credit and debit cards and give up benefits so merchants could pay lower fees? I doubt it. I find it troubling that merchants want Washington to get involved in what their fees are, rather than letting competition determine them."

7-Eleven's Chabris said in response: "Close to 1.7 million of our customers support us in bringing the issue before Congress and urge fair fees. The credit card industry can get away with collecting $2 out of every $100 in stores because their rules prohibit us telling consumers about these fees at the point of purchase. That's why we decided to launch this petition drive, to tell consumers about these secret credit card fees, though it's not just the secrecy we object to."

She added: "Credit card companies also prohibit negotiations on these fees with retailers, require retailers to accept cards for all transactions and prohibit a minimum sale amount for card use. Removing any or all of these rules could drive down the cost of these credit card fees as well as help cut the cost of products and services. This petition drive is also about asking Congress to help change this broken system."

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