Washington
Momentum is building in Congress for legislation, HR 2382, that could lower the fees that colleges pay when their students use credit cards to pay for tuition or books.
The bill, which a U.S. House of Representatives committee is discussing today, takes aim at the "interchange" or "swipe fees" that banks charge merchants to process credit-card payments. The fees, which average 2 percent of a purchase, are typically passed on to consumers in the form of higher prices or extra fees. Some public colleges charge students who pay tuition with Mastercard a "convenience fee" to offset the swipe fees, but Visa prohibits such fees.
College bookstores, which paid banks some $85-million in swipe fees in 2003, have lobbied hard for the bill, joining a coalition of three million businesses to push for its passage. Last week, retailers delivered a petition with 1.7 million signatures to members of Congress.
If enacted, the bill would eliminate the higher fees that banks collect on rewards and corporate cards, and allow retailers to set minimum transaction amounts for card purchases. It would also permit merchants to reject cards with especially high fees and offer lower prices for customers who pay with lower-cost cards or with cash.
In the Senate, Sen. Christopher J. Dodd of Connecticut has said he plans to offer legislation to "substantially modify" swipe fees. Senator Dodd, the chief architect of a credit-card bill that cleared Congress last spring, is overseeing an overhaul of the rules governing the financial-services sector.
Meanwhile, lawmakers in both chambers have introduced legislation that would allow merchants to band together to negotiate the fees. The House Judiciary Committee approved a similar bill last year, but efforts to attach it to the credit-card bill failed (though that bill did require the Government Accountability Office to study the fees).
Supporters of the bills believe their chances are better now, in part because more consumer groups are joining the fight. They are also encouraged by Senator Dodd's comments supporting a bill.
"There is a greater recognition by both the House and Senate Finance Committees that they have unfinished business in credit-card reform," said Richard Hershman, director of government relations for the National Association of College Stores.
Comments
1. lfarina - October 08, 2009 at 05:22 pm
Let the free market work: Don't use the cards. Pay by check.
Why should colleges get special treatment?
There were no credit cards when I went to college. There is a mentality now that "everything" should be put on a card.
2. rhershman - October 09, 2009 at 10:20 am
Lfarina,
1.) The problem is we do not have a free market when it comes to credit and debit card interchange rates. Visa and MasterCard are associations of banks and they get together and establish their complex rates. There is currently litigation underway to help resolve this. Both companies recently went public to try and partially insulate themselves from the litigation.
2) Colleges are not getting special treatment nor are they seeking it. They are just like any other merchant or organization that accepts plastic. We cannot negotiate lower rates. Neither can Wal-Mart. The US pays the highest interchange rates in the world even though we have one of the largest economies. Colleges and universities are being saddled with these increasing costs, which contribute to higher costs for education for students and parents.
3) You are absolutely right that there is a mentality that everything should be put on plastic. The banks spend billions on marketing. Visa's advertising slogan is "It takes Visa." The card companies' ads even chastise people who use checks or cash in check out lines. Signature debit cards carry similar interchange flat fee, plus percentage rates as credit, even though paper checks cost only a few cents to process. Even classic board games now include debit cards instead of cash.
The reality is most businesses don't have a choice not to accept credit and debit cards. This bill doesn't solve all the problems, but is a common sense proposal that would help address some of the most egregious rules and practices of the banks.
Rich Hershman
National Association of College Stores