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Years of intense lobbying, Congressional hearings, and retail-driven campaigning has finally brought legislation to Capitol Hill that ought to force the big credit card companies to base their card transaction fees on the parameters of real-world competition. Retail trade groups and grocers lauded the introduction of the bipartisan bill, H.R. 5546, and have high hopes it will make its way into law.
House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT) introduced the measure, titled the Credit Card Fair Fee Act of 2008. It is co-sponsored by eight Republicans and four Democrats: Reps. John Boozman (R-AR), Louie Gohmert (R-TX), Ralph Hall (R-TX), John Peterson (R-PA), Todd Platts (R-PA), Bill Shuster (R-PA), John Sullivan (R-OK), Joe Wilson (R-SC), William Delahunt (D-MA), Zoe Lofgren (D-CA), Anthony Weiner (D-NY) and Peter Welch (D-VT).
The Food Marketing Institute said the legislation promises to save consumers and retailers billions of dollars, by requiring that Visa and MasterCard credit card transaction fees be based on what would be charged in a truly competitive market.
"This law would restore fairness and reason to an anti-competitive, anti-consumer, and broken electronic payments system," said FMI President and CEO Tim Hammonds. "For far too long, the card companies and banks have set these fees in secret with impunity - particularly interchange fees, which make up about 80 percent of the cost.
The legislation applies to electronic payment systems that account for at least 20 percent of the annual credit and debit card dollar volume. Only the Visa and MasterCard systems currently hold this market share.
"This is an important step and shows that members of Congress recognize the importance of this issue for American consumers," said Tom Zaucha, president and c.e.o. of the National Grocers Association. "It will provide a more competitive and transparent credit card fee system that better serves American consumers, ultimately by reducing fees."
The legislation would require a committee of merchants and representatives of card companies and banks to negotiate uniform fees for debit and credit card transactions. The negotiators would decide which costs the fees should cover, such as computer processing, communications and system maintenance, and provide financial institutions a reasonable rate of return. If the negotiators cannot reach an agreement, the decision moves to binding arbitration by a panel of experts.
The resulting fees would remain in effect for three-year periods, and could be renegotiated at the end of each period if costs and market conditions change.