House Subcommittee to Hold Hearing on Interchange Fees

The House Subcommittee on Commerce, Trade, and Consumer Protection is scheduled to conduct a hearing entitled "The Law and Economics of Interchange Fees." The hearing is scheduled for February 15, 2006, in Washington DC. According to the Subcommittee, the hearing "will explore the fees that retailers and consumers pay when using a credit or debit card." Witnesses scheduled to testify include the National Association of Convenience Stores, the Small Business and Entrepreneurship Council, and the U.S. Public Interest Research Group.

In October 2005, the Association for Financial Professionals (AFP) released the results of a survey that found that organizations are unable to refuse credit cards even as the costs associated with accepting credit and debit cards increase significantly. Many financial professionals believe their organization would sustain a significant decline in sales if they no longer accepted certain cards, especially those offered by Visa and MasterCard.

"As both credit and debit card usage continues to increase, members of the Association for Financial Professionals (AFP)are growing more concerned about interchange fees. Our October 2005 survey raised serious questions about the competitiveness of the credit card marketplace, an increasingly important part of the U. S. payment system", said Jim Kaitz, AFP's President.

Key findings of the AFP’s Interchange Survey include:

• Virtually all organizations that accept credit cards indicate that they do so to "satisfy customer demand to pay with a credit card."
• A third of organizations that sell to consumers have programs that encourage their customers to use a preferred payment method (including asking for specific payment method at the point-of-sale and price incentives).
• Many organizations have strategies to reduce the costs of accepting credit cards.
• Half of survey respondents believe their organizations would sustain a significant decline in sales if they decided to no longer accept Visa and/or MasterCard credit cards.
• Fifty-one percent of organizations accept purchasing cards from their business customers.
• Two-thirds of organizations use purchasing cards to make purchases.
• Most organizations believe that the credit card associations are engaged in price-fixing and anti-competitive behavior and support caps on interchange fees.

Full survey results are available at www.AFPonline.org/research

"AFP supports policies and practices that promote fairness and competition in the major components of our financial system and our survey highlights the need for further scrutiny in this area," Kaitz concluded.