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The National Retail Federation welcomed the recent introduction of Senate antitrust legislation that would require Visa and MasterCard to negotiate with merchants over hidden credit card processing fees that cost the average family more than $400 a year and total $48 billion annually.

"The introduction of this bill shows momentum is building in Congress and that both the House and Senate are ready to bring the credit card companies' greed under control," NRF Senior Vice President and General Counsel Mallory Duncan said. "This is a fee most consumers don't even know about, but it's the equivalent to half a dozen tanks of gas or a month's worth of groceries. If consumers knew how much they were paying for credit cards, most would say it isn't worth the price, particularly in today's economy."

"Negotiation is important because these fees are set behind closed doors and imposed on a take it or leave it basis," Duncan said. "This bill would give retailers the opportunity to negotiate terms on behalf of themselves and their customers that reflect the actual cost of the services provided rather than credit card companies' attempt to reap windfall profits from soaring prices."

Senate Majority Whip Richard J. Durbin, D-Ill., today introduced the Credit Card Fair Fee Act of 2008. The legislation is a companion measure to H.R. 5546, also named the Credit Card Fair Fee Act of 2008, introduced by House Judiciary Committee Chairman John Conyers, D-Mich., in March. Both measures would require credit card systems possessing "substantial market power" to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement could not be reached, both sides would be required to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

At issue is credit card "interchange," a non-negotiable fee averaging close to 2 percent that Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. But interchange is largely unknown to most consumers because Visa and MasterCard keep merchants from disclosing it on receipts and don't disclose the fee on monthly statements.

According to NRF estimates, the average U.S. family will pay $427 in hidden credit card interchange fees in 2008. The figure is based on the $48 billion Visa, MasterCard and their banks are projected to collect in interchange divided by the U.S. Census Bureau's estimate of 112.4 million households. The number is up from $378 in 2007, and has nearly tripled from the $159 paid in 2001, the year NRF began tracking interchange.

A 2006 report by Chicago's Diamond Management and Technology Consultants Inc. found that only 13 percent of the interchange fee is needed for actual transaction processing costs, with most of the rest going to the cost of card issuers' rewards programs and profits. Durbin was one of four senators who wrote to both Visa and MasterCard last month asking for an explanation of how the fees are set and how they are used.

Duncan testified before the House Judiciary Committee's Antitrust Task Force last summer on how Visa and MasterCard banks work through each of the two credit card companies to set interchange rates that all banks agree to charge regardless of which bank's name is on a card. In doing so, the two card companies each operate as illegal price-fixing cartels in violation of antitrust law, he said.

About The National Retail Federation
The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees - about one in five American workers - and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com

SOURCE: The National Retail Federation