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NRF Urges Vermont Governor to Sign Credit Card Bill

WASHINGTON –The National Retail Federation urged Vermont Governor Jim Douglas to sign legislation passed last week that would make it easier for c-stores and other merchants to give a discount to customers who pay by cash, check or debit card rather than credit card.

"This is very significant that we have seen such an overwhelming vote. The entire body of the state legislature realizes how badly the credit card industry is treating local merchants and their customers," NRF Senior Vice President Mallory Duncan said. "We trust that Governor Douglas will provide Vermont merchants and consumers with protection against the big credit card companies by endorsing the protections included in this bill."

"Credit card swipe fees drive up the prices paid by Vermonters every day whether they use credit cards or not," Duncan added. "This bill will put an end to the card industry's ability to interfere with merchants who want to give a discount to customers who pay by cash, check or debit card. Visa and MasterCard telling Vermont retailers they'll be fined for offering a discount for cheaper forms of payment is like Pepsi or Coke telling stores they can't charge less for other soft drinks."

In a voice vote held Tuesday, the state Senate unanimously agreed to amendments made in the House. The bill initially passed the Senate 30-0 March 31, and cleared the House 139-0 April 29, and now heads to Douglas.

Duncan, who testified in favor of the bill before the House Commerce and Economic Development Committee April 21, noted the card industry has acknowledged that the legislation will have no negative impact on the issuance of credit cards in Vermont and will not keep either state residents or visitors from using their cards in Vermont.

If signed into law, the bill would allow Vermont retailers to set a minimum credit card purchase of up to $10 without interference from Visa and MasterCard, which currently bar minimum purchase amounts in their rules. Retailers have long wanted freedom to set minimum purchase amounts because swipe fees can exceed a merchant's profit on small purchases, Duncan said.

Card companies would also be prohibited from dictating how merchants price items or blocking a merchant from giving a discount for cash, checks, debit cards or credit cards with lower-than-usual swipe fees. Cash and checks are not subject to swipe fees, and PIN debit cards are generally cheaper for merchants than credit cards or signature debit because they carry lower fees. Visa and MasterCard also could not force a retailer to accept cards at all store locations if the retailer only wanted to accept them at some locations.

While the legislation is strongly supported by NRF on behalf of retailers across the country, the fight for passage of the measure was headed by the Vermont Retail Association and the Vermont Grocers Association.
"Vermont retailers and grocers clearly made a strong case with state legislators," Duncan said. "We hope this will serve as an example of what can be done in other states when merchants, consumers and lawmakers can work together to stand up to the power of the credit card industry."

The bill is based in part on the Credit Card Interchange Fees Act, federal legislation addressing fees charged to merchants sponsored by U.S. Representative Peter Welch, D-Vt., that is awaiting action in Washington.

Officially known as interchange, swipe fees average about 2 percent of the purchase price and are charged to merchants by Visa and MasterCard banks each time one of their cards is swiped to pay for a purchase. Collections totaled $48 billion nationwide in 2008, triple the $16 billion collected when NRF began tracking the fees in 2001.

At last month's hearing, Duncan explained how Visa and MasterCard rules effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of merchandise and making cash discounts difficult. As a result, a shopping bag of goods that could be sold for $99 has to be priced at about $101 on the assumption that the customer might pay by credit card, he said. Nationwide, the average household paid an estimated $427 in higher prices in 2008, up from $159 in 2001.

In other related news, Dennis Lane, single-store 7-Eleven franchise owner and national spokesman for Reform Swipe Fees NOW!, released a statement regarding a memo sent to the Senate by the American Bankers Association (ABA) opposing amendments to regulate credit card interchange fees. Last week, Senator Richard Durbin (D-Ill.) introduced three amendments to the Restoring American Financial Stability Act of 2010 aimed at reigning in out-of-control credit card interchange fees that hurt U.S. businesses and consumers.

Lanes' memo said:

"The ABA's memo opposing efforts to bring fairness to credit card interchange fees is offensive and I hope that our lawmakers see this effort for exactly what it is -- a desperate attempt to protect the cash cow that has brought record profits for the credit card giants and big banks. The ABA must realize that their gig is almost up, so they doing whatever they can to oppose efforts that would simply add some transparency and review to the current system.

"Aside from absurdly blaming American business owners, the memo is full of mistruths about what credit card interchange fees actually are and who pays the price for their excessive rates. Let's get one thing straight -- credit card interchange fees are not paid by banks to other banks. They are paid by hardworking American consumers and businesses owners who continue to face scary unemployment and underemployment numbers and don't need to be kicked while they are already down.

"The ABA also claims that these amendments amount to 'government price setting of business-to-business transactions' ... which is not only untrue, but humorous considering that it is the current interchange fee system that truly represents price fixing, pitting Davids like me against Goliaths like Visa and MasterCard. The purpose of these interchange fee amendments is simply to ensure that these rates are fair ... these guys claim that they are, so I am not sure why they are so afraid of bringing transparency to the system."

Lane is a single-store 7-Eleven Franchise owner, who has owned and operated his store for 36 years.

Reform Swipe Fees NOW is a project by the Retail Industry Leaders Association (RILA). The project unites U.S. business owners, small and large, in a campaign for fair credit card swipe fees.

Related News:

NACS Urges Support for Swipe Fee Amendments

Retail Associations Applaud Vermont for Interchange Legislation

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