Congressional Legislative Action Alert
May 7th, 2008
H.R. 5546 – CREDIT CARD FAIR FEE ACT

H.R. 5546 was introduced in the House on March 6th, 2008 by Chairman of the U.S. House Judiciary Committee, John Conyers (D-MI) and Congressman Chris Cannon (R-UT). We have received several calls from credit unions that offer either Credit or Debit Cards concerning the possible adverse impact of the proposal on future interchange fee income for their credit union.  

H.R. 5546, amongst other items, proposes to regulate interchange fees for all credit and debit card issuers. The bill would establish a three-member government board appointed by the Department of Justice and the Federal Trade Commission to set the maximum allowable rates for interchange fees charged to Retail Merchants for access and use of the Electronic Payment System. As you are aware, an interchange fee is one of the fees retailers pay credit card issuers (including credit unions) and payment system networks such as VISA and MasterCard to support the operational framework for credit card transactions.

The House Judiciary Committee is expected to hold hearings on the bill next Thursday, May 15, 2008. CUNA, on behalf of all Leagues and credit unions, will testify against the bill. As of today, there are only 26 cosponsors (none from Illinois); however, the Merchants Payments Coalition (MPC) recently formed by retail merchants is pressing hard for cosponsors and passage of the bill. That’s where we need your help!  

Immediate Action Steps 

It is imperative that you e-mail your Member of Congress TODAY to ensure your lawmaker does not co-sponsor or support H.R. 5546 The Credit Card Fair Fee Act. In other words…… hearing from constituents back home is critical to prevent this bill from obtaining additional cosponsors and/or passing the House Judiciary Committee and subsequently the full House of Representatives. 

You may easily e-mail or write to your member of Congress via http://capwiz.com/cuna/home/. For your convenience, outlined below are “Talking Points” to oppose H.R. 5546.

For further information or with any questions, contact Don Edwards, Pat Huffman, or Cathy Pettis at 800-942-7124. 

What is interchange? 

An interchange fee is one of the fees retailers pay to credit and debit card issuers (including credit unions) and the payment networks to support the operational framework for credit card transactions.   Interchange fees are payable to the credit union (or other credit card issuer) and the payment network operator, with respect to each credit card sales transaction. Merchants contract with an acquiring bank, aggregator, or independent payment processor to provide payment-processing services and negotiate terms with the payment networks for these fees on their behalf.  

Why do credit unions oppose H.R. 5546? 

1. Regulations of interchange fees would adversely affect consumer options.   Interchange fees support a system enabling consumers to have a variety of attractive choices for credit card rate terms and conditions with their credit unions. There is no evidence that H.R. 5546 would benefit consumers; in fact price controls are likely to increase credit and debit card costs for consumers due to reduced interchange fee income to card issuers.
   
   
2. Technological innovation: Interchange is just one part of a payment processing system that is an essential component of the overall financial marketplace. Credit unions believe it is not prudent public policy to separate interchange from the overall system.
   
   
3. Merchant interchange fees include the risk of consumer nonpayment to be shared by the payments participants.   Among the costs covered by interchange fees is a credit risk premium earned by card issuers to cover losses resulting from card users’ failure to pay their accounts. Interchange fee income enables credit unions of all sizes to issue credit cards to their members.
   
   
4. Discussions regarding what value should be placed on the use of electronic payments should be within the purview of private industry participants. For merchants, the current payment processing system, including interchange, is already competitive and merchants have numerous choices to contact for interchange fees with their acquiring banking or independent processor.
   
   
5. Credit unions believe H.R. 5546 would impose unnecessary regulation over the card transaction interchange fee process by establishing a costly governmental tribunal that would be authorized to impose its decisions on a system that is more appropriately governed by the market place.