Credit-card fight: Measure would allow businesses to negotiate fees, but consumers may not see the savings

WASHINGTON — Retailers want to see their credit-card bills go down, and a measure making its way through Congress aims to accomplish that.

House Judiciary Chairman John Conyers, D-Mich., and Utah's Rep. Chris Cannon , the top Republican on the Commercial and Administrative Law Subcommittee, along with 11 other members of Congress, introduced the Credit Card Fair Fee Act this month.

The bill aims to let retailers and other businesses join together to negotiate for a better interchange fee, the term for fees paid by a merchant's bank to the cardholder's bank as part of a Visa or MasterCard transaction. American Express, Discover and other credit cards use a different model.

Currently, banks set the interchange fees for Visa and MasterCard. Under the bill, if the businesses' negotiators couldn't come to an agreement after a certain time period, a three-judge panel would make a decision.

Grocery stores, gas stations and virtually anyone that accepts Visa or MasterCard claim the fees they pay to accept the cards are spiraling out of control. The retailers want Congress to intervene. But credit-card companies and banks say this is just a cost of doing business and want to keep things just as they are now. They oppose the bill, saying it would not solve what the retailers and other businesses say it would.

Conyers said on the House floor that the bill is not an attempt at regulating the industry and does not mandate any particular outcome.

"This legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees," he said.

Cannon said the current system is "anti-competitive and secretive."

"This bill does not set prices," he said. "Instead, it would require that fees be set in a transparent manner, so other companies can compete for business and consumers would not pay artificially high rates."

But the Electronic Payments Coalition, a 54-member group that includes Visa, MasterCard, Bank of America and various banking associations, said the bill would not help anyone.

Peter Madigan, the coalition's executive director, said claims that the bill would benefit consumers are "hogwash," because nothing in the legislation says the merchants would have to pass along their savings on lower fees to consumers. The bill's aim is to control prices for businesses, he said.

"It's a price-control bill dressed in a negotiation costume," Madigan said.

Interchange fees have not increased, but the volume of people using credit cards for payment has risen, increasing the amount of fees paid, which is just a cost of doing business, he said.

Howard Headlee, president of the Utah Banker's Association, said the legislation is "misguided."