Credit Card Legislation Pits Retailers Against Banks

     WASHINGTON (CN) – Credit card companies came under sharp attack Thursday in the House Financial Services Committee as representatives consider legislation that would give shopkeepers more control over which cards they accept. “It’s not fair,” Illinois Democrat Luis Gutierrez said about the credit card fees. “There’s a lot of eye opening here.”

     Gutierrez, acting as committee chair, clearly supported the two bills before the committee, He pointed out that he got a letter from his credit card company telling him they were raising his fees the day President Barack Obama signed the CARD Act,
     He questioned the reasoning behind the increase, and told the room that he has an 800 point credit score. “I can’t think of a more secure job, I haven’t had an opponent in the last three elections,” he said, outraged. “We were fair to the banks and the banks were not fair to the consumers.”
     Ranking Member Spencer Bachus, an Alabama Republican, warned against “vindictive legislation.” He said that credit companies “don’t escape a bad economy,” in defending recent increases in rates.
     On the whole, Democrats appeared to heavily favor merchants while Republicans seemed to favor bankers.
     Merchants argued that bankers are using their market power to impose increasingly burdensome transaction fees, without giving them the ability to reject high-cost cards.
     They complained that if they accept Visa cards, they must accept all cards from Visa, even those that charge the highest fees, and that they are prevented from discounting customers who pay cash or who use cheaper cards.
     Bankers, on the other hand, argued that merchants were just trying to get out of paying their faire share. They said their companies take on the risk of transactions, like fraud, and retailers do not.
     The bankers added that the industry already operates on thin profit margins, and that the legislation could transfer the costs from merchants to cardholders.
     The committee is now considering two pieces of legislation. One would limit the “unfair practices” of credit card companies, particularly in regards to the interchange fees charged to merchants. The other seeks to implement the Credit Card Accountability, Responsibility, and Disclosure — CARD –Act in December, sooner the currently planned February of 2010.
      Cathy Miller, a Vermont shop owner in a town of just more than 800 people, gave highlt emotional testimony. She said she pays 21 cents every time somebody pays with a credit card. If somebody buys a pack of gum with a credit card, it can be cheaper simply to give it away free, she said.
     She added that merchants only had a 1.43 percent profit last year, which is $1.43 for every $100 transaction.
     “We jut can’t keep absorbing these fees,” Miller stated, adding that she doesn’t want to close her store. “We’re the hub. We’re mom and pop,” she said tearfully.
     Liberty Bank Senior Vice President Anne Duplessis, who announced with a smile that her name was French, said that Miller should try using her bank “because obviously the bank that you’re dealing with is not giving you the best deal.”
     She turned back to the bill, and argued that if retailers were given more power to reject certain cards, consumers would have to carry multiple cards with them. She also noted that the service can’t be free.
     Mark Caverly from the Local Government Federal Credit Union, likewise argued against the bill. “The bill reduces consumer choice and increases consumer cost,” he said, adding that it would allow merchants to continue to walk away from the risks that card companies almost exclusively take on.
     Nonetheless, National Retail Federation Senior Vice President Mallory Duncan maintained that the current system, where merchants cannot charge more to people using more expensive cards, is uncompetitive. He accused the credit card companies of violating anti-trust laws.
     Once the CARD Act takes effect, promotional rates will last at least six months, cardholders will have 21 days to pay from the time their bills are issued, and customers will be notified 45 days before changing the terms.
     Companies will also be required to post their contracts online for easy government regulation.

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