NRF Welcomes Senate Bill Requiring Visa and MasterCard to Negotiate Over Hidden Annual...

NRF Welcomes Senate Bill Requiring Visa and MasterCard to Negotiate Over Hidden Annual Fee

WASHINGTON--(Business Wire)--
The National Retail Federation welcomed today's introduction of
Senate antitrust legislation that would require Visa and MasterCard to
negotiate with merchants over hidden credit card processing fees that
cost the average family more than $400 a year and total $48 billion
annually.

"The introduction of this bill shows momentum is building in
Congress and that both the House and Senate are ready to bring the
credit card companies' greed under control," NRF Senior Vice President
and General Counsel Mallory Duncan said. "This is a fee most consumers
don't even know about, but it's the equivalent to half a dozen tanks
of gas or a month's worth of groceries. If consumers knew how much
they were paying for credit cards, most would say it isn't worth the
price, particularly in today's economy."

"Negotiation is important because these fees are set behind closed
doors and imposed on a take it or leave it basis," Duncan said. "This
bill would give retailers the opportunity to negotiate terms on behalf
of themselves and their customers that reflect the actual cost of the
services provided rather than credit card companies' attempt to reap
windfall profits from soaring prices."

Senate Majority Whip Richard J. Durbin, D-Ill., today introduced
the Credit Card Fair Fee Act of 2008. The legislation is a companion
measure to H.R. 5546, also named the Credit Card Fair Fee Act of 2008,
introduced by House Judiciary Committee Chairman John Conyers,
D-Mich., in March. Both measures would require credit card systems
possessing "substantial market power" to negotiate with merchants to
reach a voluntary agreement on credit card terms and conditions. If an
agreement could be reached, both sides would be required to submit
their final offers to binding arbitration by a three-judge panel
appointed by the Department of Justice and Federal Trade Commission.

At issue is credit card "interchange," a non-negotiable fee
averaging close to 2 percent that Visa and MasterCard banks charge
merchants every time a credit card or signature debit card is used to
pay for a transaction. Visa and MasterCard effectively force merchants
to pass the fees on to consumers by requiring them to be included in
the advertised price of items and making cash discounts difficult. But
interchange is largely unknown to most consumers because Visa and
MasterCard keep merchants from disclosing it on receipts and don't
disclose the fee on monthly statements.

According to NRF estimates, the average U.S. family will pay $427
in hidden credit card interchange fees in 2008. The figure is based on
the $48 billion Visa, MasterCard and their banks are projected to
collect in interchange divided by the U.S. Census Bureau's estimate of
112.4 million households. The number is up from $378 in 2007, and has
nearly tripled from the $159 paid in 2001, the year NRF began tracking
interchange.

A 2006 report by Chicago's Diamond Management and Technology
Consultants Inc. found that only 13 percent of the interchange fee is
needed for actual transaction processing costs, with most of the rest
going to the cost of card issuers' rewards programs and profits.
Durbin was one of four senators who wrote to both Visa and MasterCard
last month asking for an explanation of how the fees are set and how
they are used.

Duncan testified before the House Judiciary Committee's Antitrust
Task Force last summer on how Visa and MasterCard banks work through
each of the two credit card companies to set interchange rates that
all banks agree to charge regardless of which bank's name is on a
card. In doing so, the two card companies each operate as illegal
price-fixing cartels in violation of antitrust law, he said.

The National Retail Federation is the world's largest retail trade
association, with membership that comprises all retail formats and
channels of distribution including department, specialty, discount,
catalog, Internet, independent stores, chain restaurants, drug stores
and grocery stores as well as the industry's key trading partners of
retail goods and services. NRF represents an industry with more than
1.6 million U.S. retail companies, more than 25 million employees -
about one in five American workers - and 2007 sales of $4.5 trillion.
As the industry umbrella group, NRF also represents over 100 state,
national and international retail associations. www.nrf.com

National Retail Federation
J. Craig Shearman, 202-626-8134
shearmanc@nrf.com

Copyright Business Wire 2008