Select a page

Banking News

Interchange fees cause hot debate

Interchange fees cause hot debate

(24 November 2009 – USA) A report released by the US Government Accountability Office (GAO) has caused more controversy in the payments arena over interchange fees. In May 2009, Congress passed and the President signed the Credit Card Accountability Responsibility and Disclosure Act 2009 (CARD Act), which directed GAO to conduct a study of credit card interchange fees.

The report produced by GAO acknowledged that merchants would benefit from restrictions on credit card pricing, but said it was uncertain whether consumers would see any benefit.

Financial services lobby group, the Electronic Payments Coalition said of the findings that the GAO's report leads to a clear conclusion: current interchange legislation places the needs of giant retailers over the needs of consumers.

The group also urged Members of Congress to protect the interests of its constituents, and to oppose harmful interchange legislation.

The report said that consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult and as a result may also face higher card use costs if issuers raise other fees or interest rates to compensate for lost interchange fee income.

Smaller issuers such as community banks and credit unions, report relying on interchange fees as a significant source of revenue for their credit card operations, and analyses by banking regulators indicate such operations traditionally have been among the most profitable types of activities for large banks.

In the opposition camp, the Merchants Payments Coalition called on Congressional leaders to continue with their reforms.

The Merchants Payments Coalition said that unless Congress acts to bring competition and transparency into the interchange system, the big banks and credit card companies will continue to benefit at the expense of small businesses and consumers nationwide.
East & Partners's avatar

Comment on this article


Your comments will not be published. Required fields are marked *


Please enter the word you see in the image below:


Subscribe to our mailing list

Sign up now to keep up-to-date with the latest
market news and insights in B2B banking.

* indicates required

For more information please read our Terms and Conditions and Privacy Statements.