Federal legislation introduced in June would let retailers negotiate with banks to reduce fees that banks charge merchants every time a credit card is used to pay for a transaction.

The Credit Card Fair Fee Act of 2009—House Resolution 2695 and Senate Bill 1212—would require Visa and MasterCard banks to negotiate “interchange” fees that currently are imposed on merchants on a “take-it-or-leave-it basis,” according to the National Retail Federation (Washington).

The Senate bill would require both sides to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission if an agreement could not be reached. The House bill also would require Visa and MasterCard banks to negotiate with merchants, but would leave enforcement of the requirement to the Justice Department rather than a three-judge panel.
Visa and MasterCard effectively force merchants to pass the fees on to consumers by requiring them to be included in the advertised price of merchandise and making cash discounts difficult, according to the NRF. Most consumers don’t know about interchange fees because Visa and MasterCard keep merchants from disclosing it on receipts and don’t disclose the fees on consumers’ monthly statements, the national retail association says.

The new legislation follows on the heels of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 signed into law by President Obama. “This bill is the next step in the credit card reform process that Congress began [in May],” NRF senior vice president and general counsel Mallory Duncan said in a statement. “Congress can’t claim to have fixed credit cards without addressing the billions of dollars in artificially inflated prices that result from credit card interchange fees.

This legislation shows that lawmakers are ready to finish the job and protect consumers from these rapidly increasing fees.”

Senate Majority Whip Richard Durbin, D-Ill., introduced the Senate bill. House Judiciary Committee Chairman John Conyers, D-Mich., introduced the House bill. [August 2009 PET AGE]