Consumers Will Be Hurt By Interchange Regulation: 5 Articles of Proof

WASHINGTON, Sept. 17 /PRNewswire/ -- The Electronic Payments Coalition issued
the following statement:

Today, the Electronic Payments Coalition released key evidence from several
sources, demonstrating conclusively that consumers would be hurt by
interchange regulation in the form of higher fees, fewer benefits, and zero
savings at the cash register. Despite the misleading claims of giant retailers
who want to shift this cost, merchants themselves have confirmed that they
would not pass savings on to their customers.

Representatives of the U.S. government, international economic experts, the
Reserve Bank of Australia, and merchants themselves have acknowledged that
consumers would see no savings from any interchange regulation.

It's simple: merchants don't want to pay their fair share, and they want
consumers to foot the bill. And that's not fair.

CRA International

However, "there is no evidence that losses to consumers have been offset by
reductions in retail prices." (pp. 1, 4, 13, 58) Neither merchants nor the
RBA has presented any empirical evidence showing the extent to which the
benefits of interchange fee reductions were passed onto consumers. Rather,
"[o]ne of the main effects of the RBA's interventions has been a
redistribution of wealth in favour of merchants." (pp. 1, 4, 13, 20, 58) In
fact, the CRA study showed that since 2003, when that regulation was
implemented, cardholder fees have risen by 22% for standard cards, between
47%-77% for rewards cards, and cardholders now pay AU$480 more in credit card
fees each year. The value of rewards also fell 23% during that period.

Robert Stillman, William Bishop, Kyla Malcolm, and Nicole Hildebrandt,
"Regulatory intervention in the payment card industry by the Reserve Bank of
Australia: Analysis of the Evidence" (28 April 2008), available at
http://www.crai.com/ecp/assets/Regulatory_Intervention.pdf.

GAO Study

(p. 2) "Since Australia's regulators acted in 2003, total merchant discount
fees paid by merchants have declined, but no conclusive evidence exists that
lower interchange fees led merchants to reduce retail prices for goods;
further, some costs for card users, such as annual and other fees, have
increased. Few data exist on the impact of the actions taken in Mexico
(beginning in 2004) and Israel (beginning in the late 1990s). Because of the
limited data on effects, and because the structure and regulation of credit
and debit card markets in these countries differ from those in the United
States, estimating the impact of taking similar actions in the United States
is difficult."

CREDIT AND DEBIT CARDS Federal Entities Are Taking Actions to Limit Their
Interchange Fees, but Additional Revenue Collection Cost Savings May Exist
(GAO-08-558)

Tom Robinson, owner of Rotten Robbie's convenience stores, in testimony before
the House Judiciary Committee

Mr. Keller: Let me just be crystal-clear. Let's say you are paying 2-percent
interchange fees now, and the Conyers bill passes, and you go to the
arbitrator, and the arbitrator says 'I agree 100 percent with Rotten Robbie,
and it is going to be 1 percent,' will Rotten Robbie customers get a discount
when they go to buy donuts or gasoline or Coca-Cola as a result of that taking
interchange fees from 2 percent to 1 percent?

Mr. Robinson: Well, I don't think the marketplace works exactly like that.

Mr. Keller: But your whole argument -

Mr. Robinson: But, ultimately, ultimately, the answer to your question, the
consumer will benefit.

Mr. Keller: Okay. That is the $64,000 question, because your whole argument is
you want lower interchange fees because it is better for consumers. And so
that is why I want to give you the chance. He is saying it is not going to
benefit consumers. Is it going to benefit consumers or not?

Mr. Robinson: There is not a businessman that does not attempt to keep the
margin.

May 15, 2008

Credit Union Times, May 15, 2009, reporting on a panel discussion at the
Chicago Federal Reserve:

"A banking regulator from Australia acknowledged that there was no evidence
[prices had been lowered as a result of regulation] in his country, which has
dramatically lowered credit card interchange. 'That is a very hard question to
answer,' said John Simon, chief manager for the Payments Policy Department of
the Reserve Bank of Australia, responding to a question from an attendee at
the Federal Reserve Bank of Chicago's 2009 Payments Conference. 'There are so
many different things that might go into a price change of 98-cent can of Coke
to a 96-cent can of Coke that it's impossible to say whether or not that
reflected the lowered interchange rate or something else, a global economic
downturn, for example.'"

"Review of the Reserve Bank of Australia and Payments System Board" for the
Standing Committee on Economics, Finance, and Public Administration, June 2006

"The committee was concerned by evidence which suggested thatsome merchants
are profiteering from the ability to surcharge. While the committee notes
proposals for surcharges to be capped at a merchant's costs, it does not
believe a cap would be entirely effective. Surcharging - and in particular
excessive surcharging - occurs in markets not subject to high levels of
competition. If merchants in these markets want to charge excessively, they
could simply do so through the prices of goods and services. If surcharges
were to be capped, it is possible that other prices would rise to compensate
for the lost revenue."

For more information on this and other issues in the interchange debate,
contact Trish Wexler of the Electronic Payments Coalition at
trish@electronicpaymentscoalition.com.

SOURCE Electronic Payments Coalition

Trish Wexler of Electronic Payments Coalition, +1-202-288-1238,
trish@electronicpaymentscoalition.org