Report: Consumer Benefit Uncertain in Card Fee Debate

Gallery.shop2Restricting fees that retailers have to pay banks for accepting credit cards could benefit consumers “if merchants reduced prices for goods and services,” congressional auditors concluded in a report today.
But “identifying such savings would be difficult,” the report by the Government Accountability Office found.
The GAO’s report on the much-debated “interchange fees” did little to embolden or advance the cause of merchants to push legislation to limit such fees. The cost to retails, large and small, has risen over time as consumers have substantially increased the use of credit cards for even routine transactions.
The financial services industry, led by credit-card networks Visa and MasterCard, fared better in the report as they try to head off two proposals in Congress to limit interchange fees. The fees are set by Mastercard and Visa, but are collected by the credit card issuers, such as Chase and Citigroup.
The report covered the potential impact of the following probable actions by Congress:
(1) setting or limiting interchange fees
(2) requiring their disclosure to consumers
(3) prohibiting card networks from imposing rules on merchants that limit their ability to steer customers away from higher-cost cards
(4) granting antitrust waivers to allow merchants and issuers to voluntarily negotiate rates
“Consumers also might face higher card use costs if issuers raised other fees or interest rates to compensate for lost interchange fee income,” the GAO said. “Each of these options also presents challenges for implementation, such as determining at which rate to set, providing more information to consumers, or addressing the interests of both large and small issuers and merchants in bargaining efforts.”
The GAO interviewed merchants and found frustration over their inability to refuse the higher-fee cards or charging more for the use of a credit card than a cash payment – both of which are rules set by Mastercard and Visa.
“Interchange fees are not federally regulated in the United States, but concerns about card costs have prompted federal investigations and private lawsuits,” the GAO said. “..and authorities in more than 30 countries have taken or are considering taking actions to address such fees and other card network practices.”
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