Wednesday, July 19, 2006

U.S. Senate Judiciary Committee Hearing Recap

Statement of The Honorable Patrick Leahy United States Senator Vermont July 19, 2006

Testimony of Mr. Bill Douglass Chief Executive Officer Douglass Distributing July 19, 2006

Testimony of Ms. Kathy Miller Owner The Elmore Store July 19, 2006

Testimony of Mr. Joshua R. Floum Executive Vice President, General Counsel and Secretary Visa, U.S.A. July 19, 2006

Testimony of Mr. Joshua L. Peirez Group Executive, Global Public Policy and Associate General Counsel MasterCard Worldwide July 19, 2006

Testimony of The Honorable Timothy J. Muris Former Chairman, Federal Trade Commission Of Counsel, O'Melvney & Meyers July 19, 2006

Testimony of Mr. W. Stephen Cannon President and Managing Partner Constantine Cannon
July 19, 2006

Summary of Testimony Highlights

  • Interchange fees are just like an excise tax or sales tax getting added to the cost of a product. But at least people know that taxes are part of their purchase.
  • Credit card companies charge about 5 cents in interchange on a gallon of gaspurchased with their cards. For many that is nearly $2 per fill up that goes straightto Visa and Master Card banks.
  • The courts have said that Visa and MasterCard have market power; the agreements among their member banks to fix and charge the same fees are outrageous.
  • Retailers have no choice about whether they accept cards because of the market power of Visa and MasterCard.
  • The card companies use their power in the market to raise fees and keep the fees
    and their rules secret.
  • These fees hurt consumers and tend to hurt lower income consumers worse than others.
  • U.S. consumers pay a lot more for interchange than most other countries, with no justification.
  • The card companies are inappropriately taking advantage of their market position to extract farmore in fees than can be justified.
  • The card companies are effectively controlled by their member banks and the member banks mustagree to charge the same interchange rates.
  • The average convenience store paid about $39,730 in credit card fees in 2005. That same store only made $42,196 in pre-tax profits in 2005.
  • The average American family paid $231 in interchange and related fees in 2004.
  • The card companies like to tout the rewards they give their
    customers, but we should be sure to recognize that the vast majority of consumers do not get rewardsor airline miles with their cards.
  • Americans pay higher prices to use plastic than consumers pay in other countries similar
    to ours. The U.S. interchange fees average 1.74%, while other industrialized countries such as Britain typically pay 0.7% and Australia averages only 0.45%.
  • Credit card fees are collectively set by the card associations and we have no control over them.