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For years the government has taken a Laissez Faire approach to Interchange Rates, but recently the U.S House Judiciary Committee has begun heavily campaigning to control them. Proposed legislation (HR 5546 The Credit Card Fair Fee Act) would require Visa and MasterCard to negotiate Interchange fees directly with merchants. This would put a stop to a credit card processing company’s ability to set non negotiable fees. If the merchant and the credit card company are not able to come to terms, then they would have to submit their final offers to binding arbitration by a three judge panel.

If this new bill is passed by Congress, it is could potentially create more of a mess and ultimately higher costs. I am sure there are millions of businesses in the U.S alone, and if it passes, Visa and MasterCard are going to be getting a lot of calls from people looking to negotiate their fees. This means they will have to hire more staff to take the calls, and possibly even create systems to track all the various negotiated rates. So will this bill help the situation, or only put a band aid on what merchants believe to be an issue? Fees collected generally go to rewards programs, credit losses, and operating costs.

There are a total of 23 Bills regulating the card processing industry; some of the key ones are as follows:

SB 349/HB 2856 – Disclosure

A contract authorizing a merchant to accept a credit card or debit card may not: (a) Give a financial institution the right to charge a merchant or deduct from the merchant account the cost of a credit card or debit card transaction because the cost of the transaction exceeds a predetermined amount; or (b) require a merchant to limit or waive its rights under this act.

SB 348 – Sales tax

Discount rates, transaction charges, interchange rates or any other charges or fees charged to merchants or deducted from credit card or debit card sales for processing credit card or debit card transactions shall not be applied to the tax portion of any credit card or debit card sales.

HB 7775/S5035 – Disclosure

Whenever a contract authorizing a merchant to accept a credit card or debit card specifies that the merchant is bound by the rules of a financial institution, the contracting financial institution must: (1) Give the merchant access to the complete rules referenced in the contract, notify the merchant of any rule additions or modification, and provide a copy of the new or modified rule; (2) provide a complete schedule of interchange fees, credit card and debit card transaction rates and any other fees that the financial institution charges to merchants, as well as provide an explanation of which rates apply to the merchant and the situations in which those rates apply; and (3) not require a merchant to agree not to disclose the contracting financial institution’s rules or rates as a condition of receiving access to the rules and rates.

Whether or not Congress takes action is still up in the air. The important thing is that they make an educated decision. I will keep you posted on the outcome.