Conyers vs. Credit Cards -- The background and the fight ahead

by: Interrobanger

Mon Jul 09, 2007 at 11:10:17 AM EDT

And I was just going to write a new version of a post I did for Daily Kos last week when I saw that ScottyUrb had linked it as part of the Saturday round-up. This one is more work-related, actually. There's a group here I've been consulting for called the Merchants Payments Coaltion -- it's a coalition of coalitions, small businesses, restaurants, convenience stores and so on, banding together to fight against unfair credit card fees that target merchant account holders. The website is appropriately named UnfairCreditCardFees.com.

The specific fee, my pet issue, is called the interchange fee. If you have an account to accept credit card payments, or are close to someone who does, then this hardly needs explaining. But for the uninitiated, here's the deal:

When you use a credit card either online or in person, your bank has to talk to the merchant's bank. Similar to ATM fees, this is not a costless transaction (although it is much cheaper than they let on). But as we know, any business always passes on costs to its customers, and so those fees end up embedded in the cost of the goods we pay.

As Wikipedia explains:

Interchange fees have a complex pricing structure, which is based on the card brand, the type of credit or debit card, the type and size of the accepting merchant, and the type of transaction (e.g. online, in-store, phone order). Further complicating the rates schedules, interchange fees are typically a flat fee plus a percentage of the total purchase price (including taxes). In the United States, the fee averages approximately 2% of transaction value.

Ever wonder why you see those signs that say "minimum credit card purchase" at coffee shops, mom n pop stores and the like? That's because the credit card fee eats so far into the margins that if you use a card to buy something less than a dollar, the store-owner could actually lose money on the sale.

Now, it's against the rules set by the credit card associations to charge different prices for cash and credit, unless it's calculated ahead of time and advertised that way. Gas stations and liquor stores sometimes find this manageable, but it's impossible for most businesses.

(Also worth noting, Visa and MasterCard, though publicly traded or headed for IPO, are little more than shell companies controlled by banks like JPMorgan Chase and Citi. When you talk about deceptive and manipulative credit card practices, you're talking about the banks.)

Worse, those thousand-plus page agreements that merchants have to sign before they can accept Visa or Mastercard is a rule included to ensure the customer has no idea what's going on: it's highly highly against the rules for merchants to tell customers about the interchange fee they pay.

These interchange fees keep rising though technology keeps reducing the cost of transactions. That makes it a huge cash cow for the banks. And as I said in my first Daily Kos diary on the subject, this fee is the biggest reverse-Robin Hood scheme you've never heard of:

The banks that control the Visa/MC use the money generated from them to pay for the rewards cards you can only get if you qualify, and you have to be worth something already to qualify.

So think about it: A person living on a fixed income, who uses cash to pay for most items, pays a small percentage of that interchange fee every time he or she buys everyday goods at any place that takes credit cards. The banks then take those fees and give them to people who certainly don't need it, but like it when their bank gives them free stuff. And who doesn't like free stuff?

Anyway, I hope you're still reading, because here's what's timely -- later this week, Conyers and his Antitrust subcommittee are expected to hold a hearing on this. From our website:

No official announcement has been made, but sources tell the Merchants Payments Coalition (MPC) that the hearing will likely be held on July 19. Witnesses have not been named, but Committee members are expected to use the hearing to examine the impact of interchange fees on consumers and businesses as well as the antitrust law implications of the interchange fee system.

The hearing would be the fourth congressional session this year to examine credit card fees and the first to focus specifically on interchange. Last year, the Senate Judiciary Committee and a House Energy and Commerce Subcommittee held  major hearings  on whether interchange practices violate federal antitrust laws and the consumer protection impacts of the fees.

If there's more, and if you'll have me, I'll be back to follow up on it. This could be big, at least if you care about unsavory banking practices and fixing the interchange fee.

Gov's administration calls out the Detroit News

by: Hazen Pingree

Tue Jun 05, 2007 at 22:23:26 PM EDT

ADMINISTRATION ASKS NEWSPAPER TO REVIEW STANDARDS

A major error in a Sunday column - that incorrectly cited House Speaker Andy Dillon (D-Redford Twp.) leveling leadership criticisms of Governor Jennifer Granholm that were actually made by Senate Majority Leader Mike Bishop (R-Rochester) - has sparked a call from the administration to the Detroit News to conduct an internal review of the column and standards used on the paper's editorial page.

Meanwhile, it looks like another Michigan Democrat is the victim of another right-wing noise machine boo-boo - this time involving the "fair and balanced" crusaders of Fox News and U.S. Rep. John Conyers (D-Detroit). From the AP:

In a story about the indictment of Rep. William J. Jefferson on bribery charges, the network ran footage of Conyers.

Both men are African-American.

Fox News acknowledged it mistakenly ran the wrong videotape and apologized for the error.

But Conyers is upset. "This type of disrespect for people of color should no longer be tolerated," he said. "I am personally offended by the network's complete disregard for accuracy in reporting and lackluster on-air apology."

A spokeswoman for Conyers said the congressman was upset that the on-air apology did not say specifically what the mistake was.

Of course, Fox News/The Detroit News playing loose with the facts - unintentional or otherwise - is hardly anything new. But it's nice to see it getting at least a little MSM play.

Wednesday Coffee Talk/Open Thread

by: BZP

Wed Apr 25, 2007 at 07:04:58 AM EDT

• WOOD TV: Legislators dither while state runs on fumes. Tick-Tick-Tick.
• LSJ (AP): State setting stage for possible layoff of non-union workers. This is where we're headed if we don't fix the budget.
• DFP: Dems: Business tax deal in sight. "Dillon said the Democratic plan would raise the same revenue as the SBT -- about $1.9 billion a year -- but would give tax cuts to companies based in Michigan or with significant employment and facilities there."
• DNews: Raise gas tax by $1 to reduce oil appetite. Here we go again... "Simply making vehicles more fuel efficient has not been effective in reducing gasoline use."
• Lessenberry: Essay: Primary Focus. Lessenberry takes a look at Michigan's long, strange history with presidential primaries. You can listen to Jack's interview with MDP Chair Mark Brewer here.
• WalbergWatch: MDP Petition for Walberg. Boy, it's nice to see that the MDP is already hitting Walberg this hard. Keep it up!
• Mr. Rogers' Neighborhood: Mr. Rogers' Senior Staffer Charged with Domestic Assault. LiberalLucy: "Everyone's innocent until proven guilty, and let's just hope that Mr. Rogers can show some real leadership in the handling of this situation."
• WOOD TV: Stupak-led panel shines spotlight on food safety. Rep. Stupack has been getting a lot of ink this week... good for him.
• Stone Soup Musings: Conyers' plan to cover the uninsured. Kathy has the scoop on Rep. Conyers' Congressional Forum on Universal Health Care with Single Payer Financing from yesterday.
• Stone Soup Musings: Add your name to Sen. Levin's letter to the President. If you want to send a message to the president about his opposition to stem cell research, you can do so here.
• Conservative Media: Howell fights discrimination: Cleary promotes discrimination. The Guru contrasts the productive work of the Howell Education Foundation with Cleary University's decision to pay the hatemonger Ann Coulter $30,000 for two hours worth of work.
• Colorado Springs Gazette: Affirmative action may be bound for ballots. After helping shove Prop 2 down our throats last year, Ward Connerly is hoping to push another ballot initiative through Colorado next year.