NACS, NACDS, NCPA, NCGA File Suit Against Credit Card Companies
By George Anderson
The National Association of Convenience Stores (NACS), the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA) and the National Cooperative Grocers Association (NCGA) have filed a class-action, antitrust lawsuit against Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, J.P. Morgan, Chase, Fleet Bank, Capital One and other banks alleging the parties are in collusion in setting interchange fees for credit card payments.
Interchange fees, according to the associations involved in the suit, represent the largest component of credit card fees and, as such, have impact with consumers. The groups claim that interchange rates in the U.S. are among the highest in the world and cost the average household $232 last year.
“The credit card interchange system serves as a hidden tax, both on merchants and consumers, and raises the costs of all products regardless of the form of tender,” said Hank Armour, CEO of the National Association of Convenience Stores (NACS). “Fees have rapidly increased over the past several years, despite efforts by individual convenience stores to control these costs or make the competitive market work.”
Visa spokesperson Paul Cohen told Reuters, interchange rates are “a fair mechanism for fueling growth and sharing system costs.”
John Rector, general counsel of the National Community Pharmacists Association (NCPMA) said in filing the suit, “We are looking for long-term reform of the credit card interchange fee system. The current system discriminates against small, independent businesspersons, and there is no basis for that discrimination. We ultimately seek a competitive and fair interchange fee system. Interchange is much higher in the United States than any other country, and there is no legitimate basis for that.”
Moderator’s Comment: Are interchange fees a “hidden tax” as alleged by the associations bringing the lawsuit against Visa, MasterCard, et al or are they
“a fair mechanism for fueling growth and sharing system costs” as maintained by the credit card companies and banks? What impact do interchange fees have on retailers, consumers
and financial institutions?
Back in July, a judge from the federal court in the Northern District of California dismissed an antitrust lawsuit brought on behalf of merchants against
Visa, MasterCard and a number of banks over interchange fees. According to Judge Jeffrey S. White, the merchants did not have a basis for bringing their claim under Section 1
of the Sherman Act. The court also ruled that the retailers had no factual basis to support their claims that the credit card companies were setting the fee rates. –
George Anderson – Moderator
Credit card companies and banks get away with murder in the UK as well. The small print is impossibly small to read and consumers are constantly inundated with tempting but deceptive albeit legal offers. No wonder so many people are in debt that they may never get out of. If this is what fuels our economies – and it certainly looks as if it is – shouldn’t some powers that be somewhere in the greater outer beyond do something about it? Is this really a good basis upon which to boast of economic growth when it is actually no such thing at all? So far most of the people are being fooled. It’s really more than time for a wake up call and some serious card cutting.
Anyone besides me drawing a parallel between gasoline price collusion and credit card interchange fee collusion? I thought so. The (extremely liberal, anti-business, oft-overturned) District Court here in NorCal predictably ruled in favor of more taxes when they dismissed a suit against the credit card companies brought on behalf of businesses. The ruling reinforced this court’s bias favoring taxation vs. free enterprise.
When will we understand all of the ways that banks/credit card companies gouge us while they invest our money and collect the interest? We finally got rid of many of the fees associated with using debit cards with retailers or with ATMs other than our own, and of transaction fees for writing checks and paying bills online. Now we’re learning about hidden fees from the card companies passed along to us by retailers.
CC companies were recently forced to increase their minimum monthly payments from 1% to 4%, hopefully getting some families out of debt sooner and educating others. Now it’s time to control their transaction fees of all types – hidden and viewable – so that we can deal with them in a transparent manner.
Visa, MC, Amex, and Discover, as well as the top banks, can signal each other easily. They are well aware of each other’s pricing, promotions, fees, and terms, and each time someone changes something, they all know about it instantly, or they wouldn’t be doing their jobs properly. Credit card fees will march upward relentlessly unless retailers act together. The lawsuits are only 1 action. Over 2,200 retail companies joined Retex, a buying co-operative (www.retex.com), to negotiate together for lower rates of all kinds. Since the late 1980’s, when it started, Retex saved over $100 million for its members by negotiating group rates for long distance phone service, computer networks, supplies, etc. Retex is currently negotiating credit card processing rates, so it would be helpful if retailers large and small joined Retex (there is no charge) and did their buying together.
If they wanted, retailers could even buy a small bank, or start one, to be their captive group credit card processor. If 100 retailers each put up $10,000 capital, they’d have $10 million to buy a small bank together. Divide and conquer might also work well. What would happen if retailers across the country simply stopped taking Visa unless Visa agreed to halve its rates for the next 20 years? Either Visa would go into horrible financial trouble or they’d cave in. And then it would be MC’s turn. And then Amex’s turn. Right now, it’s easy for the top few banks and the interchange firms to stick together because retailers aren’t showing much unity. The lesson of the great labor unions is that there is power in unity.