UPDATE 1-Card issuer shares decline as new regulation looms
* Visa down 8.5 percent, MasterCard off 7.5 percent
* Senate votes to limit card fees (Updates Visa and MasterCard stock prices, adds Capital One and American Express prices and details, adds byline)
By Joe Rauch
CHARLOTTE, N.C., May 14 (Reuters) - Shares of four major U.S. credit card issuers fell amid a broad industry selloff on Friday after a U.S. Senate vote to limit credit and debit card fees.
Shares of Visa Inc (V.N) dropped 8.5 percent to $78.40, while MasterCard Inc (MA.N) fell 7.5 percent to $214.86.
American Express Co (AXP.N) shares declined 3.5 percent to $41.31, and Capital One Financial Corp (COF.N) dropped 5.3 percent to $42.53.
Visa and MasterCard posted the two largest percentage declines on the New York Stock Exchange.
American Express shares posted the largest percentage decline among Dow Jones industrial average components, while Capital One shares had the biggest decline among KBW Bank Index companies.
The proposal to limit credit and debit card fees was offered as an amendment to the financial reform bill in the Senate. It limits interchange fees on debit transactions and allows merchants more freedom in setting guidelines for card use by customers.
"We expect investors to shoot first and ask questions later as they wrestle with the financial impact of this development," FBR Capital Markets analyst Scott Valentin said in a note to clients.
He said the unexpected passage of the amendment probably means card issuers will eliminate many debit-card transaction rewards and few merchant cost-savings will be passed on to the consumer. (Reporting by Joe Rauch; Editing by Lisa Von Ahn and John Wallace)
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As a small business owner – 4 employees/1.3mil yearly, interchange fees almost resemble ganster-style tactics. I pay 2% discount rate up front and another 2.7% average interchange fee, which I’m not allowed to know or figure into sales. It varies by card type, and shows up on my monthly statement as a dollar amount – At my business, that 2.7% would be enough to hire another(sorely needed) employee. On top of this, cash-back tactics should also be illegal – Visa doesnt give you the cash back – they charge the retailer like myself, without permission – they advertise 2% cash back and then take it from MY account under the “interchange fee”, so on those cards, I’m losing over 6% of the gross sale, of which I’m only informed of the 2% discount fee. And to top it off, if I accept visa/mc, it’s against the law for me to refuse a certain type of card – I have to accept all of them or none. But it’s entirely legal for the card company to sell me on a 2% fee and then charge me over 6% at the end of the month.
If I did that to customers I’d be in jail for fraud. As a mail-order business, I’m a slave to credit card transactions, so my only hope is that regulators put a leash on these hidden fees.
I pay more for interchange fees than I do for good healthcare on 3 families. Imagine what places like Walmart pay…
Places like Visa got themselves to a point where cards are a necessary part of life, so now they start taking what they want – think of it like gas prices. We all need to drive, so we have to pay what they demand.
If congress wants to create jobs, help us all expand, and help get us spending more money at other businesses, limiting interchange fees would be a great step forward.
Just my own example, I want to hire another worker, add another 2500 sf addition so I can expand, which would then require a couple more workers… the effect of any business gaining just a few percent would be substantial.
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