As Congress moves to implement consumer protections for credit card users, merchants are angling for some safeguards of their own.

In a conference call Monday, an organization called Consumers for Competitive Choice noted that credit card issuers have been raising interest rates and fees on cardholders in advance of new regulations.

The group warned that merchants could be in line for increases in interchange fees — the charges they pay on credit card transactions — and that such an increase would harm small businesses and consumers.

“Every time a purchase is made (by credit card), the company pays a fee,” said Jim Conran, executive director of Consumers for Competitive Choice. “Everybody on all spectrums realizes that until small businesses start to grow and thrive, we’re going to continue to have problems with the economy.”

Corvallis furniture store owner Eric Blackledge, who joined Conran on the conference call, said the fees are burdensome already.

“We pay anywhere from 1.7 percent to 3.17 percent,” Blackledge said. “It has a significant impact on our bottom line.”

Those costs, he said, have to be passed on to consumers.

Conran said card issuers might try to raise interchange fees as a way of making up for new restrictions imposed by the Credit Card Accountability, Responsibility and Disclosure Act. His group wants Congress to cap the rates before that happens.

“We want to make sure those rates are kept at reasonable levels,” he said.

Card industry representatives defended the fees, saying they’re a necessary cost of doing business.

Trish Wexler, a spokeswoman for the Electronic Payments Coalition, said retailers get plenty of benefits out of accepting credit and debit cards and argued that the interchange fees are very reasonable now, at a national average of 1.6 percent to 1.7 percent.

She said the fees cover not only processing of transactions but also a considerable amount of risk for card-issuing banks and credit unions, which transfer payments to merchants immediately but have to wait for consumers to pay their credit card bills.

“That money has to come from somewhere,” she said. “If the merchants don’t pay that, it’s their customers who will end up having to pay that instead.”

Retailers’ objections to interchange fees are “perhaps a little disingenuous,” said Peter Garuccio of the American Bankers Association.

“The push from merchants to have Congress step in and regulate interchange rates is not new,” Garuccio said.

“This is an industry vs. industry issue. At the end of the day, what it boils down to is merchants not wanting to pay for interchange fees.”

The dispute between merchants and credit card companies has some businesses feeling caught in the middle, said Rick Hein, president and CEO of Corvallis-based OSU Federal Credit Union, which issues Visa credit and debit cards.

“There’s no doubt there are some folks out there who haven’t been playing very nice in the credit card market,” Hein said. “Unfortunately, it spills over onto those of us who have.”

For a small financial institution such as OSU Federal, he said, interchange fees are the only way to offset risk factors such as losses from data security breaches.

Hein said interchange rates are “at an all-time low” and, if they fall any further, credit unions and other small card issuers would have to get out of the business, leaving consumers with fewer choices and a less competitive credit market.

“It’s not good business,” he said.


Special Projects Editor, Corvallis Gazette-Times and Albany Democrat-Herald

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