Congress Looking At Interchange Fees, Small Businesses See Hope

When Congress and the President created the Credit CARD (Card Accountability, Responsibility and Disclosure) Act earlier this year, it was one of the quickest bills to get passed into law. Basically, lawmakers wanted to rush the bill in the interest of placating consumers who were in an uproar because of the bad practices being done by credit card companies.

During the drafting of the Act, merchants also ran a campaign to include in the Act legislation that would benefit them. They were specifically aiming for a law that would control interchange fees. Interchange fees are fees that credit card companies issue to merchants whenever a customer of theirs uses a credit card to pay for purchases. Their campaign was, however unsuccessful and the Credit CARD Act passed without any legislation against interchange fees. Merchants are not giving up, however.

At the moment, there are two initiatives being discussed in Congress aimed at limiting interchange fees. Support for the initiatives has been overwhelming among small business owners and retailers. However, it is going to have to compete in a legislative climate swamped with many priorities such as healthcare and regulatory reforms.

Moshe Orenbuch, analyst for Credit Suisse, believes that there is no change that the legislation will be passed this year. Bruce Harting who serves as analyst for Barclays Capital agrees, saying, “Health care is still topic number one for this year. Our sense is that this discussion resumes next year”.

There is some movement in legislation over this issue, though. Representative Barney Frank who serves as the Chairman of the house Financial Services Committee, last week announced during a session that the interchange issue will begin to be seriously considered by his committee. However, he did not announce a definite timeline for the topic’s debate and it may not be a top priority issue for him. Frank is also currently engaged with legislation aiming to speed up the Credit CARD Act implementation which does not include interchange fees.

Those who are lobbying for interchange reforms are not getting discouraged, however. Next month, a study regarding interchange fees in the United States will be released by the Government Accountability Office. They are hoping that the study will give them more ammunition to support their efforts.

Merchant Payments Coalition chairman, Mallory Duncan said, “A year ago it was a bit of a long shit. Right now it is much more likely to see legislation out”. He said that an interchange law would not necessarily put limits on interchange fees. It will, however encourage more competition in the market. At the moment, MasterCard and Visa processes 75% of all credit card electronic payments.