Dec 4, 2007
ARLINGTON, VA — December 4, 2007 — The Food Marketing Institute (FMI) applauds Congress for continuing to investigate and expose abusive credit card company practices, most recently at today’s hearing on how consumers are blindsided by interest rate hikes under a rule known as Universal Default. The House Government Affairs Permanent Subcommittee on Investigations is conducting the hearing.
"This is but one example of the hidden, egregious ways that Visa and MasterCard bilk consumers and businesses out of billions of dollars each year," said FMI President and CEO Tim Hammonds. "The most costly scheme by far is the interchange fee that card companies extract from each and every plastic transaction."
These fees, averaging about 2 percent per payment, cost $36.3 billion in 2006. At the current rate of increase, interchange fees will cost nearly $43 billion in 2007 and cross the $50 billion mark in 2008. "The cost keeps rising," Hammonds explained, "because card use is increasing and Visa, MasterCard and the banks that sit on their boards fix the fees in secret out of all proportion to the actual transaction costs, which the fees were originally designed to cover."
Congress has already held three hearings on interchange fee issues, including one on July 19 by the House Judiciary Committee Antitrust Task Force and two in 2006 by the full Senate Judiciary Committee on July 19 and the House Commerce Subcommittee on Commerce, Trade and Consumer Protection on February 15.
The U.S. Justice Department revealed at the 2007 hearing that it is investigating interchange fee antitrust issues. Merchants are pursuing more than 50 lawsuits against credit card companies and banks, charging that interchange fees are fixed in violation of the antitrust laws.
Virtually every major developed economy in the world has launched investigations into the interchange price-fixing practices of Visa and MasterCard or declared the practices illegal and moved to curb them. These include Australia, the European Union, Israel, New Zealand, Poland, Spain, Switzerland and the United Kingdom.
"FMI joins all retailers in urging Congress to continue scrutinizing interchange fee abuses and all excessive and unwarranted credit card rates and charges," Hammonds said. "Once we shine the light of disclosure on these practices, we can pursue solutions for consumers and retailers."
FMI is a leading member of the Merchants Payments Coalition, a group of nearly 30 associations representing retailers, supermarkets, drug stores, convenience stores, fuel stations, online merchants and other businesses that accept debit and credit cards. The MPC is fighting for a more competitive and transparent card system in which interchange fees are based on actual transaction costs. The coalition’s member associations collectively represent about 2.7 million stores with about 50 million employees.
Contact:
Bill Greer
202.220.0667
wgreer@fmi.org
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