Calif. officials probe credit card interchange fees
Pedro Nava (D)
SACRAMENTO, Calif. (Legal Newsline)-California officials, under the leadership of a Democrat running for state attorney general, are probing rising credit card interchange fees.
State Assemblyman Pedro Nava, D-Santa Barbara, and the Assembly Banking and Finance Committee he leads is investigating interchange fees that credit card companies charge businesses and consumers in the course of transactions.
The credit card industry collects about $5 billion from credit- and debit-card fees charged in California. Most of the interchange fees in the state are collected by Visa Inc. and MasterCard Inc.
"California consumers and businesses are being taken to the cleaners to the tune of $5 billion dollars," said Nava, who is vying to the be the state's next chief legal officer. "Wall Street banks are holding us hostage and something must be done to return this money to struggling small businesses and consumers."
Interchange fees typically include a flat transaction charge plus a percentage of each purchase. Last year, American merchants paid an average interchange rate of 1.82 percent per transaction, according to the Nilson Report, a Carpinteria, Calif.-based newsletter that tracks the industry.
The California Retailers Association says the way interchange fees are assessed is fundamentally unfair.
"Most consumers don't know that every time they swipe a credit card, they help drive up the cost of consumer goods," CRA President Bill Dombrowski said in an earlier statement issued by Nava. "This particularly impacts consumers who don't have or use credit cards because Visa and MasterCard rules effectively require that everyone pay the credit card price even if they are paying with cash, check, debit card or even food stamps."
There is federal legislation pending in Congress aimed at addressing interchange fees. U.S. Reps. Peter Welch, D-Vt., and Bill Shuster, R-Pa., have introduced HR 2382, the Credit Card Interchange Fees Act of 2009.
On the Senate side, Richard Durbin, D-Ill., and Christopher Bond, R-Mo., have introduced amendments to HR 627, the Credit Cardholders' Bill of Rights Act of 2009, that allow for consumer discounts for debit cards and less expensive credit cards, and for greater transparency concerning hidden interchange fees.
From Legal Newsline: Reach staff reporter Chris Rizo at email@example.com.