Date: 06/24/08
Rep. Louie Gohmert (R-Texas) says he’s “a free-market guy” who believes that the market should be left to “make its own determination” on price.
But when it comes to a bitter feud between banks and merchants over the credit card payment system, he is backing a solution that is anything but laissez-faire.
After getting an earful from grocery and convenience store owners in his East Texas district about the so-called interchange fees they pay to banks, Gohmert wants Congress to force the banks to negotiate with merchants on a lower rate.
“Now the banks are mad,” he said. “I’ve sided with them before, and this time I don’t think what’s going on with interchange fees is fair. When you see that [merchants] are not able to negotiate a better fee, you see market forces aren’t working.”
An outcry from small-business owners in their districts has persuaded 16 Republicans to support legislation sponsored by the liberal chairman of the Judiciary Committee, Rep. John Conyers Jr. (D-Mich.), to rein in interchange fees.
Lobbyists for the banking industry have decried the legislation as a price-control bill. But in this case, even some Republicans have set aside their qualms about heavy-handed regulation, citing a torrent of complaints from people who pump their gas or sell them groceries back home.
The cries of such constituents have so far trumped the pleas of banking lobbyists, a group with whom Republican supporters of the bill have often sided.
“Normally, I’m not a strong one on regulatory solutions. But in this case, the need for relief is clear,” Rep. Phil English (R-Pa.) said.
An important source of revenue for many banks, interchange fees are a bane to merchants. Set by Visa and MasterCard, the fees are paid to card issuers via the merchant’s bank whenever a customer uses plastic at a store. The rates vary across segments of the retail industry, but on average, they amount to 1.75 percent of purchase price, the card associations say.
Lobbyists for retailers argue that the fees are higher in practice — approximately 2 percent of the purchase price — once the growing use of rewards cards, which often carry higher fees, is taken into account. They argue that Visa and MasterCard — which have a combined 80 percent share of the credit card industry — use their market power to push up the interchange rates.
All told, interchange fees paid by merchants ballooned from $16 billion in 2001 to $42 billion in 2007....
Source: thehill.com
