A sustained tide of consumer anger about all types of bank fees is adding momentum to the long-running merchant campaign against interchange.
Merchants have been trying for several years to make the fees they pay for accepting credit and debit cards a consumer issue. In print ads, posters at gas pumps and signs at checkout counters, they equated interchange with late fees and other charges paid by cardholders.
Now, an effort to collect customer signatures at 7-Eleven Inc. stores has taken consumer involvement in this business-to-business dispute to a new level. The petition, which 7-Eleven said has already garnered roughly 1 million signatures, channels consumer resentment over credit card late fees, rising interest rates, credit line cutbacks, and other types of bank fees, like overdraft protection fees.
Merchants "smell a lot of blood in the water with the way people feel about credit card companies … and they're going to use it for their own purposes," said Davia Temin, the chief executive of the marketing firm Temin & Co.
Gerri Detweiler, a credit adviser at the lead generator Credit.com Inc., agreed that "the time is probably right now more than ever" for a campaign like 7-Eleven's. "A lot of people are just fed up with credit card companies in general and they're willing to sign anything" that purports to "get back their money," she said.
Retailer trade groups like the Merchants Payments Coalition contend that interchange fees drive up costs for all consumers, even those paying with cash, because merchants must raise their prices to compensate. That argument has reached lawmakers, who are currently debating a handful of bills that would regulate interchange. It also has some support from consumer groups.
Ed Mierzwinski, the consumer program director for the U.S. Public Interest Research Group, said interchange is a consumer issue "in some respects: everybody pays more at the store and more at the pump, including people who pay with cash." His group has not formally endorsed any of the bills currently in Congress, but "generally we agree with the merchants' position … that interchange is an abuse of the antitrust laws."
The payments networks call the merchants' argument misleading. "The ongoing interchange debate is a business dispute between retailers and financial institutions," a spokesman for Visa Inc. said. "Consumers are unwittingly signing petitions that would effectively hurt them in the end. The reality is that a group of large retailers are leading a campaign to shift their cost of doing business directly onto consumers' shoulders." Consumers would face higher annual fees and reduced benefits were interchange payments to be reduced, the payments networks say.
(Concern for the cardholder aside, significant sums are at stake for both sides: the Merchants Payments Coalition claims that its members — about 100 national, international and state organizations, collectively representing about 2.7 million stores — paid $48 billion in interchange fees last year, while according to Cards&Payments' 2009 Bankcard Profitability Study, the networks' issuing banks get almost 19% of their annual card revenues from such fees.)
The credit card reform legislation that President Obama signed in May puts restrictions on what issuers can charge consumers, but not on what banks or processors can charge merchants. A proposed amendment would have made it easier for merchants to offer discounts to those who pay with cash. But it was reduced to a study on interchange in the final law.
Legislation introduced last month in both chambers of Congress would let merchants strike collective-bargaining agreements with banks when setting interchange rates. A few weeks later 7-Eleven started its petition to "Stop Unfair Credit Card Fees." (CardLine, a SourceMedia Inc. publication, reported the campaign Monday.)
Temin said such petitions will likely get policymakers' attention, because "they have to listen. Lawmakers are responsive to the public. Whether this will win the day, I don't know. Whether people actually know what they're signing, I don't know. But they will certainly affect the debate."
She and others said the networks have been losing the public relations battle.
"You've got to applaud the merchant lobby for being far more aggressive in framing the issue," said Eric Grover, a former Visa executive and the principal of the consulting firm Intrepid Ventures.
He suggested that the networks, through their issuing partners, could inform consumers about their position on interchange through fliers or messages printed on cardholders' monthly statements. "You're sending out tens of millions of statements every month, you've got a fixed cost there, you routinely put fliers in there to promote products … you've got a direct channel of communication with consumers" and can make the case that cardholder fees could increase, or their rewards could decrease, if interchange were regulated, Grover said.
But Temin cautioned that, in the current environment of hostility toward bank fees, such a strategy could backfire. Direct marketing to cardholders could "whip up" consumers even more and move the interchange debate from "bubbling on the edge of people's perception to right in the middle of it," she said.
