Debates over Proposed Interchange Fees Law Gaining Momentum

U.S. Sen. Arlen Specter is planning to introduce a bill that would further regulate the credit card industry. The bill, which focuses on interchange fees, would be the Senate version of the House Credit Card Interchange Fees Act. With this at hand, debates regarding the law are heating-up between its proponents and opposition.

Interchange fees are fees paid to banks and credit card networks and which are charged to merchants each time a consumer or customer uses a credit card. It is one aspect that business owners are said not to have control of. The bill seeks to inform the public of these fees and thus also prevent extra charges against merchants for certain reward schemes that credit card companies implement to attract heavy card usage. A "minimum purchase amount" would also be made available to business owners to avoid such fees. The minimum amount would be set before a customer could use a card and also enable surcharges depending upon the type of card used.

The bill was originally introduced by Rep. Bill Shuster amidst complaints from merchants. They say that have very little recourse but to accept the steep charges made by card issuers. A strict implementation of these fees also leaves them with no choice but to accept them, stating that many business transactions are made through credit cards.

The Electronic Payments Coalition, which includes American Express, Visa and MasterCard, issued a statement saying that the proposed law would spike prices for consumers and eventually affect reward programs. The coalition, which is an association of card companies and banks, also found an ally in the Pennsylvania Association of Community Bankers. Kristine Warner, spokesperson for said group, implied that there would be a big effect on community banks. She said that since community banks needs to charge higher fees than larger financial companies, some may be "forced out of business" if customers would switch to less-costly cards because the bill proposes that consumers themselves pay for this fee.

Merchants, on the other hand, stated that they are losing money on these transactions. A businessman is hopeful that since card companies would be mandated to inform them of the rates and the justification behind such charges; it might keep the latter from collecting high charges. Dan McNabb, a member of the Pennsylvania Food Merchants Association, also said that it would be foolhardy for any retailer to pass the fees to consumers if the bill becomes a law or even set a minimum amount for a charge as this would drive away customers. As of press time, however, the final wordings of the bill are still being finalized.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.