Merchants Payments Coalition Stokes Interchange Fire
WASHINGTON -- The continuing debate over credit-card interchange fees intensified earlier this week when the Merchants Payments Coalition (MPC) submitted a report to the House Judiciary Committee's Antitrust Task Force, which responded to questions raised by Representative Ric Keller (R-Fla.), during a recent hearing concerning MasterCard's interchange fees, the organization said in a statement.
"This report separates facts from fiction on credit-card interchange practices," MPC chairman Mallory Duncan, who is also the senior vice president and general counsel at the National Retail Federation, said in a statement. "The credit-card industry has made numerous questionable statements. We have attempted to set the record straight."
During the hearing in July, where Duncan testified on behalf of the MPC, Keller highlighted key issues where merchant and credit-card industry representatives made conflicting statements. A CSNews Online report at that time also outlined some of the inconsistencies brought up at the meeting -- including disclosure of operating rules; discounts for cash transactions; the "take it or leave it" environment for accepting credit cards and the associated fees; the effect it has on consumer prices; and the proposed solution to fix the market.
In the report sent to the House Judiciary Committee this week, the MPC outlined the following inconsistencies and the group's response:
-- Merchants claim Visa and MasterCard keep their operating rules secret, while the companies state the rules are posted on their respective Web sites. In response, the MPC stated that the two companies post excerpts of their rules online, not in its entirety, which is needed for full understanding. In addition, Visa allows retailers to see the full operating rules only after they sign a non-disclosure agreement, the MPC stated.
-- Merchants alleged they were not allowed to offer discounts for cash purchases, but both companies state the practice is permitted. The MPC stated that while federal law prohibits a ban on cash discounts, credit-card rules make doing so difficult. As an example, the MPC claimed Visa attempted to characterize such discounts as a prohibited surcharge on credit-card use, and threatened fines of $5,000 per day to merchants that offer cash discounts.
-- Retailers claimed that interchange rates are non-negotiable, while Visa and MasterCard claim the opposite. The MPC argued in its report that merchants are not present when interchange rates are set, and as a result, the rates can not be negotiated.
-- Merchants and the credit-card representatives chose opposite sides on the effect such fees have on consumers. Retailers claimed the fees increase the cost of goods, while the credit-card companies claimed the fees offer benefits to consumers. The MPC stated in its report that the fees do pay for rewards and benefits programs offered by credit cards, but that all consumers suffer from higher prices that result from the fees.
-- Retailers argue that the solution to the problem of interchange is allowing for competition in a free market. Credit-card companies, however, argue that retailers are asking for price fixing. The MPC calls the allegations against retailers false, and said merchants have not advocated for price controls in hearings or meetings with Congress.
-- Lastly, retailers wish to choose the cards they accept, while Visa and Mastercard have an "honor all cards," rule that requires merchants to accept all the companies' cards. The MPC said retailers see this as a key part of the problem because if banks competed through lower interchange rates, they would still be required to accept cards with higher rates. In addition, information on each card's interchange rate is not provided to merchants.
To see the report in its entirety, visit:
www.unfaircreditcardfees.com/uploads/InterchangeIssues.pdf
"This report separates facts from fiction on credit-card interchange practices," MPC chairman Mallory Duncan, who is also the senior vice president and general counsel at the National Retail Federation, said in a statement. "The credit-card industry has made numerous questionable statements. We have attempted to set the record straight."
During the hearing in July, where Duncan testified on behalf of the MPC, Keller highlighted key issues where merchant and credit-card industry representatives made conflicting statements. A CSNews Online report at that time also outlined some of the inconsistencies brought up at the meeting -- including disclosure of operating rules; discounts for cash transactions; the "take it or leave it" environment for accepting credit cards and the associated fees; the effect it has on consumer prices; and the proposed solution to fix the market.
In the report sent to the House Judiciary Committee this week, the MPC outlined the following inconsistencies and the group's response:
-- Merchants claim Visa and MasterCard keep their operating rules secret, while the companies state the rules are posted on their respective Web sites. In response, the MPC stated that the two companies post excerpts of their rules online, not in its entirety, which is needed for full understanding. In addition, Visa allows retailers to see the full operating rules only after they sign a non-disclosure agreement, the MPC stated.
-- Merchants alleged they were not allowed to offer discounts for cash purchases, but both companies state the practice is permitted. The MPC stated that while federal law prohibits a ban on cash discounts, credit-card rules make doing so difficult. As an example, the MPC claimed Visa attempted to characterize such discounts as a prohibited surcharge on credit-card use, and threatened fines of $5,000 per day to merchants that offer cash discounts.
-- Retailers claimed that interchange rates are non-negotiable, while Visa and MasterCard claim the opposite. The MPC argued in its report that merchants are not present when interchange rates are set, and as a result, the rates can not be negotiated.
-- Merchants and the credit-card representatives chose opposite sides on the effect such fees have on consumers. Retailers claimed the fees increase the cost of goods, while the credit-card companies claimed the fees offer benefits to consumers. The MPC stated in its report that the fees do pay for rewards and benefits programs offered by credit cards, but that all consumers suffer from higher prices that result from the fees.
-- Retailers argue that the solution to the problem of interchange is allowing for competition in a free market. Credit-card companies, however, argue that retailers are asking for price fixing. The MPC calls the allegations against retailers false, and said merchants have not advocated for price controls in hearings or meetings with Congress.
-- Lastly, retailers wish to choose the cards they accept, while Visa and Mastercard have an "honor all cards," rule that requires merchants to accept all the companies' cards. The MPC said retailers see this as a key part of the problem because if banks competed through lower interchange rates, they would still be required to accept cards with higher rates. In addition, information on each card's interchange rate is not provided to merchants.
To see the report in its entirety, visit:
www.unfaircreditcardfees.com/uploads/InterchangeIssues.pdf