Just before Memorial Day Weekend, the Merchants Payments Coalition (MPC) slammed banks and credit card companies for “outrageous” swipe fees, but John Berlau of the Competitive Enterprise Institute (CEI) recently said that retailers are responsible for high costs.
In a May 21 press release, the Merchants Payments Coalition, which counts Walmart and 7-Eleven as members, warned American consumers to “get ready to be side-swiped by your bank’s exorbitant credit card fees.”
Berlau, a senior fellow at CEI, said the retail lobby is unhappy with the price controls they advocated for under the 2010 Dodd-Frank Act’s Durbin Amendment, Open Market reports.
“Now, they are lobbying Washington to ram ordinary folks even more with policies that will make security breaches like that of Target more likely to happen,” Berlau said, according to Open Market.
According to Berlau, big retailers urged Senate Majority Whip Dick Durbin (D-Ill.) to insert a provision into the financial reform law to require interchange fees charged to retailers by banks to be “reasonable and proportional” to the cost incurred by the issuer.
The retail lobby then asked the Federal Reserve to prevent banks and credit unions from profiting on fees charged to retailers, which Berlau said has shifted the costs of processing card transactions from retailers to consumers, Open Market reports.
Berlau said price controls on credit card interchange fees would likely have a similar impact, pointing to a 2009 GAO report that found Australia’s caps on interchange fees led issuers to cut rewards and increase fees for cardholders.
“Worse, it appears that none of the $1 billion in savings that merchants received as a result of lower fees were passed on to consumers in the form of lower prices, the GAO noted,” Berlau said, according to Open Market. “Now that would be a real side swipe to consumers!”