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Interchange Fees Rear Their Head

Retailers and credit card companies are facing off over interchange fees as merchants try to add language to a Senate bill that limits the ability of banks to raise interest rates.

The Merchants Payments Coalition has long lobbied against the fees, which are about 2 percent of each purchase and are charged to merchants each time a customer uses a credit or debit card.

As Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) readies his consumer credit card bill this week, the retailers are counting on Senate Democratic leadership to take up their cause.

“It’s the fee that the banks don’t want you to see,— said Peter Mirijanian, the spokesman for the merchant coalition.

After failing to get traction last year in the House, lobbyists for the retailer group, whose members include the National Grocers Association and two powerful retail groups that are set to merge, the National Retail Federation and the Retail Industry Leaders Association, have been blanketing Capitol Hill trying to pressure lawmakers to add it to the credit card bill.

Dodd’s bill currently includes only an interchange study provision.

“We’re consistently having serious conversations with key players in Congress,— said one lobbyist for the retailers. “We’ve been pretty well-received and there’s a lot of interest in this issue.—

The Electronic Payments Coalition has answered the merchants with a massive lobbying push of its own, saying the merchants are simply “venue shopping— to get the provision added to any potential legislative vehicle.

“Interchange has nothing to do with the contents of the Dodd credit card practices bill, that’s a consumer issue,— EPC spokeswoman Trish Wexler said.

She added: “At the end of the day, merchants don’t want to pay their share of the interchange system and they want consumers to pay it instead.—

The opposing coalitions spent almost exactly the same amount on federal lobbying during the first quarter: The merchants racked up $245,000 and the banks $250,000, according to Senate lobby disclosure reports.

Electronic Payment Coalition members, which include the Credit Union National Association, the National Association of Federal Credit Unions and the Independent Community Bankers of America, are individually doing ad buys on interchange fees this week in publications such as the Washington Post, Roll Call and The Hill.

“Right now it’s just a matter of education,— said Richard Gose, senior vice president of political affairs at CUNA. “We’re talking to them and are getting our credit unions to tell the Senators, staff, and House Members how this affects them.—

Visa and MasterCard, which together control 80 percent of the credit card market, argue that the fees are necessary to cover their infrastructure costs, and that they are also the ones guaranteeing payment to the merchants and should be compensated for that risk.

Card companies also argue that the interchange fee issue is not germane to the credit card bill, which is aimed at consumer concerns, and that forcing the amendment onto the legislation could poison the entire package.

“It’s an all-out effort,— one lobbyist for the credit card companies said, referring to attempts to block the provision.

This is the merchants’ latest attempt to try to get language on the issue.

Last year the coalition lobbied on a bill before the House Judiciary Committee that would have given merchants the ability to negotiate fees with banks under the guidance of the Justice Department.

The merchants also tried unsuccessfully to get the language in the House version of the credit card bill earlier this year.

Both sides have put forward their most sympathetic voices, with small mom-and-pop merchants speaking out against the fees, and community banks and credit unions arguing that they are necessary.

Senate Majority Whip Dick Durbin (D-Ill.) is likely to take up the merchants’ cause and spearhead an interchange fee amendment, according to financial services lobbyists.

Durbin introduced interchange fee legislation in the previous Congress, but it failed to make it out of the Senate Judiciary Committee.

Durbin, who unsuccessfully led the effort to include “cram down— on the bankruptcy bill last week — a provision that would allow bankruptcy judges to modify a homeowner’s mortgage terms — has verbally expressed his frustration with the financial services industry, which could fuel his desire to make sure something gets done on interchange fees this time around, lobbyists say.

“I would hope that the Senator wouldn’t use bad policy as a retribution tool,— one financial services industry lobbyist said.

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