The New York Times recently published an article that closely examines the present satisfaction level of those involved with the settlement proposal between credit card issuers and consumer interest groups. According to the article, the dispute between retail merchants and Visa, MasterCard, and leading banks is getting heated.
This dispute, while seeming simple, pertains, in part, to the allowance for merchants to begin charging customers a fee just for using a credit card. Somehow, though, this arrangement does not affect American Express credit card holders as it is not part of the settlement negotiations because of rules they have established long ago.
All of this probably seems familiar and that is because merchants sounded off against the Justice Department’s antitrust settlement with the same credit card companies a couple years ago. The terms of this settlement stipulated that credit card networks need to rewrite the rules that prevent merchants from discounting the use of specific credit cards. Of course, the regulations that American Express – and the merchants who opted for their network – chose to set has led to a potential government antitrust lawsuit that is still pending.
In defense of the settlement, credit card companies offer that it is quite probable most merchants will probably not take advantage of the terms, probably in light of the fact that consumers are not happy about it. As a matter of fact, most of the retailers contacted for the Times story affirmed exactly that. A few, smaller retailers, however, reported that they plan to move according to larger shifts in the market. Robert Benham, owner of Balliets, am Oklahoma Cita women’s boutique, said that he might follow suit if larger stores begin to charge the fee.
This, then, begs the question: what will happen if the settlement is ineffective? If this settlement does not please most of the parties involved, another measure may have to be instituted and experts are at a loss as to what, exactly, they should do about it. Mallory Duncan, senior vice president and general counsel at the National Retail Federation stated that he wants the settlement to get rid of these rules in favor of more transparency so that everyone involved knows what the charges will be up front. Duncan said,
it becomes almost Talmudic to interpret the various MasterCard and Visa rules. What they claim on the surface often has no bearing on how they operate in practice. So the merchant on the street doesn’t know what he can or cannot do, without asking the card companies. And you can’t have competition when the other guy gets to tell you how to run your business.
In rebuttal, Bob Stolebarger, a lawyer for the Electronic Payments Coalition, a firm that represents members of the payment industry, said
Visa and MasterCard both have tried to simplify and streamline their rules for the benefits of merchants. The rules are available, they’re in plain English, and the make perfect sense.
Of course, this is a statement that comes directly from the organization that represents Visa, MasterCard, and the banks that issue their credit cards.
Henry Polmer is a Washington lawyer who specializes in electronic payment networks and he disagrees with the other statements. He says that capping fees or forcing each issuing bank to set and dictate their own rates is the only way to prevent skyrocketing credit card fees. Letting MasterCard and Visa do these things of their own accord, he states, will not help to establish the kind of rapport that consumers need with the big banks and credit card companies. Indeed, the matter is much larger than simply whether or not to charge fees or how much should be charged.