Friday, April 24, 2009
It's been a busy week in Washington, with both the White House and U.S. Congress calling to task credit card companies and card-issuers for playing tough with consumers by imposing harsh terms and rate increases. Interchange hasn't received much attention in the public dialogue, but at least one pending bill does address it. Meanwhile, merchants have been ratcheting up their rhetoric to keep the interchange debate alive.
"President Obama has consistently said Main Street businesses and middle-class families are the backbone of America's economy," said Lyle Beckwith, Senior Vice President for Government Relations at the National Association of Convenience Stores. These hidden credit card interchange fees hit those folks the hardest and only for the sake of padding the big banks' bottom lines."
NACS is part of a group known as the Merchants Payment Coalition, which has been waging war on interchange in the media and in Washington. Earlier this week, the MPC delivered a letter to White House Economic Advisor Lawrence H. Summers, requesting a meeting with White House officials in order to plead its case for "interchange reform."
The letter was written in response to news that the White House was meeting on April 23 with senior executives representing the card brands and banks. Pam Joseph, Vice Chair for Payments at US Bancorp, was at the White House meeting. So were William Sheedy, President of Visa Inc.'s North America region, and David Nelms, Discover Financial Services Chief Executive Officer, to name a few.
"Credit cards have been made unnecessarily complicated for consumers, often leading them to pay more than they reasonably expect," the White House noted in a statement following that meeting. The statement went on to explain that President Obama wants some basic "principles" followed in any credit card legislation that gets enacted under his watch. These include:
On the same day, the President was meeting with card executives, two ranking members of the Senate Banking Committee – Sen. Charles Schumer, D-N.Y., and Sen. Chris Dodd, D-Conn., Committee Chair – called on federal financial institution regulators to impose an emergency freeze on interest rates tied to existing credit card account balances.
"Over the past year, the Federal Reserve has cited the financial crisis as one of the reasons for acting quickly to implement new lending facilities and programs to protect financial institutions," the senators wrote in a letter to Fed Chairman Ben Bernanke and other regulators. "It is long past time for the regulatory agencies to act with the same sense of urgency to protect consumers from the behavior of those same financial companies."
Dodd is lead author of the 2009 Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act), which was approved in committee and now awaits a vote by the entire Senate. That bill would impose restrictions on rate increases and penalty fees, ban universal defaults, and regulate the way payments get posted to cardholder accounts.
It also contains a provision requesting that the Government Accountability Office (the federal watchdog agency) analyze the impact of interchange fees on merchants and consumers.
Rep. Carolyn Maloney, D-N.Y., is pushing a similar bill through the House. That legislation, the Credit Cardholder's Bill of Rights (HR 627), cleared the House Financial Services Committee on April 22, 2009, by a vote of 48 to 19.
HR 627 has no provisions addressing interchange – yet. It's awaiting a vote before the entire House, which approved a similar measure in the last Congress. Maloney's previous legislation failed to garner approval in the Senate, however.
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