Retailers to negotiate credit card fees with banks

Posted by Daniel Palmer on 21st July 2008

The US House Judiciary Committee’s passage of the Credit Card Fair Fee Act (H.R. 5546) could have wide reaching implications for credit providers and retailers alike. The proposed legislation would allow retailers, large and small, to join together to negotiate directly with credit card companies in an effort to reduce the “artificially high” credit card interchange fees.

The National Restaurant Association has applauded the recommendation, claiming that it could reduce the stress on American retailers. “We applaud the House Judiciary Committee for recognising that the unexplained increases in fees and inability to negotiate a fairer rate with credit card companies has gone on for too long,” said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association. “The Credit Card Fair Fee Act is a solution to an issue that poses a burden to small businesses, including restaurants, across the country.”

Interchange fees are meant to cover the cost of processing a credit card transaction and the risk taken by the issuing bank that it will be repaid. However, reports show that the cost of processing is steadily decreasing in the United States, while fees continue to rise. The result appears to be an increase in revenue for the card issuer at the expense of both businesses and consumers as interchange fees amount to approximately $2 of every $100 spent using credit cards.

Over the last three years, unfair credit card practices, policies and fees have been scrutinized by the public, consumer groups, the Federal Reserve and Congress. Interchange fees have been the subject of hearings three times in recent years under both Republican and Democratic Congresses.

Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the lack of competition in the credit card marketplace. The Credit Card Fair Fee Act is a direct outgrowth of the Antitrust Task Force’s bi-partisan examination into the fees, policies, and practices of the credit card industry.

The Merchants Payments Coalition (MPC), a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses, are fighting against “unfair credit card fees” and seeking for “a more competitive and transparent card system” that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. They have even set-up a website,, to plead their case.