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Interchange Travels Up Main Street to Federal Government

Not even the government is exempt from negotiating fair and reasonable interchange rates; NACS retail member sheds the light on how swipe fees impact small businesses.
June 16, 2010

WASHINGTON - Today at 2:30 EST the Senate Appropriations Subcommittee on
Financial Services and General Government is holding an oversight hearing on the federal government€™s payment of interchange fees. Sen. Richard Durbin (D-IL), who championed a swipe fee reform amendment as part of the Financial Services Reform bill, is chairman of the subcommittee.

"The federal government, like small businesses around the country, is forced to accept" the interchange fee rates set by Visa and MasterCard, notes a release by Sen. Durbin.

NACS member Wendy Chronister, president and CEO of Springfield, Illinois-based Chronister Oil Company, which operates Qik-n-EZ convenience stores, will deliver testimony on the impact interchange fees have on her company, how there is a lack of transparency and fairness in the current system, and how small businesses €" contrary to what Visa and MasterCard claim €" are not able to negotiate interchange fees. She will also speak in support of Sen. Durbin€™s swipe fee reform amendment because it "requires the credit card companies to be competitive."

Here is a look at some of Chronister€™s testimony:

"With respect to credit and debit card expense, we are faxed a notice of an increase in fees and it is what it is. If we didn€™t take credit cards, we could not compete and would certainly go out of business. We have no ability to negotiate fees and we are powerless to deal with these cost increases. Yet, given the competitive landscape we are in, we have an increasingly smaller pot out of which to pay them. Costs that cannot be controlled have a far broader, negative impact on the business than do other costs."...

"The Durbin Amendment allows merchants such as our company to give their customers discounts (either for using a cheaper card network or a cheaper form of payment like checks or cash). Currently our contracts with Visa and MasterCard prohibit us from giving these types of discounts to our customer. It also means that they can agree on the rules and impose them on us and prohibit us from offering discounts to our customers."...

"[t]he Durbin Amendment is not about driving credit card companies out of business...The Durbin Amendment means that the credit card companies will be subject to a little of the same competition that we are subject to. If one of them is willing to provide a more attractive rate, we can promote it. If a consumer wants to pay cash or use a debit card, we can offer that consumer a more attractive price because the costs associated with these types of payments should be less. In effect this allows the consumer to decide how to spending his or her money and know something about the cost impact of that decision."...

See NACS Daily for complete coverage of the hearing.

Also, contact your legislators and ask them to support the Durbin Amendment €" unchanged €" in the final version of the Financial Services Reform bill. Retailers must weigh in and tell the industry€™s story to members of Congress, or else they will believe the misinformation that is being spread by the credit card companies and the banking lobby.