The Merchants Payments Coalition (MPC), a group of retailers who conduct high-volume electronic fund transactions through credit and debit cards, held a meeting Sept. 22 in Washington, D.C. to report on its current status and coordinate its ongoing activities.
Berman & Co. represented ABL at the meeting, which included MPC members that make up roughly 40 percent of all credit/debit card volume in the United States. Merchants and retailers, racked with what are currently the highest "interchange" rates in the world, support the regulation of fees charged by credit card companies and the banks that act as their sub-contractors.
The ubiquity of credit and debit cards in American life is unarguable. Whether purchasing gas, groceries, a six-pack of beer, or soon a candy bar out of a vending machine, plastic has become the "way to pay" for many millions of Americans.
Retailers can also benefit from the use of credit/debit cards as they have less cash to handle and are less vulnerable to theft.
However, the convenience of credit/debit cards has also not been lost on credit card companies and the banks that act as middlemen when it comes to issuing credit cards.
That seemingly magical and painless transaction that occurs when one swipes a card has provided these companies with a means by which to dip their fingers into the pockets of both the customer and the merchant.
After thorough research, the coalition crystallized some key points that they felt needed to be addressed.
The coalition found that interchange fees are far higher than the actual costs and risks involved in processing transactions, and these fees are rising quickly. These high interchange rates, which are imposed by card issuers' banks on merchants' banks when transactions take place, are a result of the unregulated bankcard industry.
Initially meant to offset technology costs and risk, rates have increased as these other cost factors have decreased.
These "hidden taxes" have amounted to a drain on the economy and are severely out of line with interchange rates in countries throughout the world. With the eventual effect of padding banks and card companies' profits, they stealthily attack consumers and merchants.
During the recent MPC meeting, a number of different approaches to educating lawmakers and the public about interchange costs were identified.
Litigation and Regulation MPC is tracking a handful of lawsuits that have been filed by large retailers against individual credit card companies and it appears that more lawsuits will be ensuing though it is unclear at this time what the finer points of the complaints will be.
On the regulatory front, the issue of interchange fees has been presented to the regulatory community through the Federal Reserve in order to raise awareness in that sector. The meaningful education of regulators on the matter looks to be an important step for the MPC to strengthen their position on the issue.
Legislation With the recent hurricanes, a window has opened to bring up the topic of credit card fees with Congress, what with rising gas prices and the wholesale destruction of so much personal property.
MPC plans to keep the issue fresh in the minds of lawmakers so that they can consider the issue after they complete budget appropriations and hurricane relief legislation
Communications There is no denying that credit/debit cards are often the most convenient way in which to pay for a product or a service. Credit card companies have been very successful in marketing that image and that is unlikely to change.
The challenge that lies ahead for the MPC is communicating to the lawmakers, the media and the public how unprecedented these increasing interchange fees are and the impact they have on businesses and consumers.
As membership of the MPC continues to grow and the issue of interchange fees become more prominent, the MPC expects to heighten its awareness efforts and apply methods to bring the United States back into the rate mainstream when it comes to credit/debit card fees.
Source: ABL Leader, November, 2005, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.