Hearing On Secret Credit Card Fees
A congressional hearing held February 15 focused on nearly $40 billion in secret fees that credit card companies force merchants to pass on to consumers annually. The House Energy and Commerce Committee’s Subcommittee on Commerce, Trade and Consumer Protection is scheduled to hold the hearing on “The Law and Economics of Interchange Fees.”
The subject of the hearing is interchange, a secret fee of about 2 percent that Visa, MasterCard and their member banks charge consumers each time a credit or debit card is used. Visa and MasterCard’s non-negotiable contracts with merchants require that the fee be built into the advertised price of merchandise, forbid the fees from being shown on receipts and block cash discounts from being offered in most situations. Other credit card companies don’t charge interchange as such because of differences in the way payments are handled, but nonetheless charge similar fees to process transactions.
Visa and MasterCard kept interchange fees largely secret for years, but the issue has emerged as a major public policy concern in the past year. The Federal Reserve held a conference on the subject last May, and the House last fall passed legislation – still pending in the Senate – that would have required a Federal Trade Commission investigation into interchange’s role in rising gasoline prices. Nearly 50 lawsuits have been filed in federal court claiming that interchange practices violate federal antitrust law.
Visa and MasterCard alone collected $27.6 billion in interchange fees during 2004, while transaction fees charged by other credit card companies brought the total to $39.2 billion, according to Merchants Payments Coalition figures.