Piercing the Veil: Cannon, Conyers Introduce Legislation to Save American Families Billions

Press Release

PIERCING THE VEIL: CANNON, CONYERS INTRODUCE LEGISLATION TO SAVE AMERICAN FAMILIES BILLIONS

Congressman Chris Cannon (R-UT), along with Judiciary Chairman John Conyers (D-MI), today introduced the "Credit Card Fair Fee Act" (HR 5546) to address the anti-competitive aspects of credit card interchange fees and save American consumers and American families billions every year. Upon introducing this legislation, Congressman Cannon said,

"Free market capitalism is the most successful economic system the world has ever witnessed. Bedrock principles of that system include transparency and competition. The current system of setting fees that merchants pay for credit card transactions is anti-competitive and secretive. This bill does not set prices. Instead, it would require that fees be set in a transparent manner so other companies can compete for business and consumers would not pay artificially high rates."

Cannon continued, "In the end, credit card companies should set whatever fees the market will tolerate. This bill is a win for consumers, for retailers, and for the credit card industry which will benefit from competition."

In closing, Congressman Cannon said, "This is a complicated issue. This bill may not be the final answer, but society's interest in this is so great that we hope all interested parties will come to the table."

For more information, please visit: http://chriscannon.house.gov/ChrisCares/CreditCards.htm

For a graphical depiction of how this bill would mandate negotiations, please visit: http://chriscannon.house.gov/UploadedFiles/creditcardflow.pdf

Each year, consumers pay billions of dollars in hidden fees that never appear on their monthly statements. Those fees are called "Interchange fees."

Credit card companies and their banks charge them to store owners, businesses, or anyone else anytime a credit card is used to make a purchase. As much as $2 of every $100 you spend goes to interchange companies or the banks behind the card.

Last year, more than $36 billion in interchange fees were collected, up 17 percent from 2005 and 117 percent since 2001. The average American family is now paying more than $300 a year in credit card interchange fees. Retailers then pass along the credit card interchange fee to consumers in the form of higher prices. The credit card interchange fee increases the price of everything consumers buy, even those who don't use plastic and choose instead to pay for their purchases in cash or by check because retailers are not allowed to offer lower prices for cash or debit transactions because of their agreements with Visa and Mastercard.

For example, with the price of gas at more than $3 a gallon, credit card companies and their banks are collecting as much as 8 cents a gallon in interchange fees. Americans are paying the highest interchange fees in the world, an average of two percent, compared with less than one percent in most other industrialized countries.

Credit Card fees have a complex pricing structure, which depends on the card association, the type and size of the merchant, the type of credit card and the type of transaction. Convenience stores, supermarkets, warehouse clubs and other merchants that sell low-margin items may have lower rates. Hotels and car rental businesses have higher rates. Among transactions, those with a credit card have higher rates than those with a signature debit card, whose rates are in turn higher than PIN debit card transactions. Sales that are not conducted in person, such as over the phone or Internet, have higher interchange rates, apparently due to their increased risk of fraud.

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