If it seems as though that $40 blouse cost more than you anticipated, you might be right. According to the Wall Street Journal, retailers around the nation may be charging even more fees for the privilege of using your credit card in their stores. A ban issued by both Visa and MasterCard years ago prevented merchants from tacking on surcharges; now, though, those rules appear to be shifting as lawsuits are being settled.
For decades, many retailers fought for the right to charge additional fees for their customers who use their credit cards. The reason, they say, is to offset the costs the card companies place on those retailers. If they didn’t want to pay those costs, they were free to not accept the credit cards. This, of course, wasn’t an option as it would have severely limited their customer base. The lawsuits were filed and now, in some instances, it’s been decades and the suits are finally being settled. The losers? The consumer, of course.
Merchants prefer complete flexibility, and in their eyes relaxing some of these rules like surcharging (is) something that will be permanent,
Glenn Fodor, a Morgan Stanley analyst, told the Wall Street Journal. Some of the companies that have filed lawsuits in the past include Safeway, Inc., Kroger Co. and Payless Shoe Source. Their arguments are credible: the card companies engage in anti-competitive behavior with the fees.
Two Summers Ago
Many may recall that two summers ago, the Senate, in its efforts of debating and hammering out Dodd-Frank Wall Street reform and the new Consumer Protection Act, attempted to also rein in various debit and credit card fees. Illinois Democratic Senator Dick Durbin had hoped to end the card networks’ practice of preventing merchants from using incentives to steer customers toward other credit cards and credit card brands. When the bill reached the president’s desk, however, that provision had been revamped into one that would only allow merchants to offer discounts only for certain forms of payment.
Long before Fast and Furious made the headlines and before it resulted in a vote to hold Attorney General Eric Holder in Congress contempt, he and the Justice Department “finished the job Congress couldn’t do”, as he suggested when he declared an antitrust lawsuit against the credit card companies and a simultaneous settlement between the government and Visa and MasterCard “embraced the principle rejected by Congress”. In a presser, he said,
With today’s lawsuit we are sending a clear message: We will not tolerate anti competitive practices. We want to put more money in consumers’ pockets, and by eliminating credit card companies’ anti competitive rules, we will accomplish that.
It didn’t quite work out that way.
The settlement forces Visa and MasterCard to rewrite portions of their contracts with merchants that now limit merchant efforts to promote other cards with lower transaction fees or cards from other networks. (Fees on Visa cards, for example, are typically about 2 percent.) In statements, both Visa and MasterCard insisted the settlement was no big deal. Our discounting practices have long been more flexible than our major competitors’ and have permitted merchants to discount for cash, checks, debit cards or other payment brands,” said MasterCard’s general counsel, Noah J. Hanft, in the statement.
The National Retail Federation, a merchant trade group, agreed, but also added that merchants who take MasterCard also take Visa, and most also accept American Express – and have to abide by the terms of all three contracts.
MasterCard executives knew full well that they could make helpful changes to their rules, but the Visa and American Express rules would still be in place,
said Mr. Duncan. “There are three locks on the door, and they opened only one of them.”
This, naturally, opens up a host of other problems and if folks were hoping the politicians would step up to the plate, there’s a good chance no one’s disappointed. When it comes to the viewpoint of both merchant and consumer advocates, it’s not inclusive of AMEX.
It continues to insist it will fight the lawsuits in court. “This consent decree isn’t going to affect merchants who carry all three cards, because they’re still going to have valid contracts with American Express,” said Bert Foer, president of the Antitrust Institute, which advocates for consumers against concentrated economic power. “When I was a merchant – I ran a chain of jewelry stores for 13 years – American Express was more expensive. The way I look at this settlement, it doesn’t mean very much at all until they defeat American Express.”
Even those who say consumers can ask for other discounts agree that a.) it’s not much of an incentive; and b.) no one’s going to give up their frequent flier miles to save two dollars. Further, it’s doubtful retailers will push anything like that either since it would keep holding up the lines of consumers ready to check out and move along with their business.
Plus, how would they train checkout clerks who have no interest in keeping up with who has the better incentives? What would they say, “I see you’re paying with MasterCard. Would you like to use your Visa instead? “Not many consumers will take too kindly with yet one more person telling them how to spend their money.
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