Interchange Fee - Controversy

Controversy

Regulators in several countries have questioned the collective determination of interchange rates and fees as potential examples of price-fixing. Merchant groups in particular, including the U.S.-based Merchants Payments Coalition and Merchant Bill of Rights, also claim that interchange fees are much higher than necessary, pointing to the fact that even though technology and efficiency has improved, interchange fees have more than doubled in the last 10 years. Issuing banks argue that reduced interchange fees would result in increased costs for cardholders, and reduce their ability to satisfy rewards on cards already issued. The Merchants Payments Coalition argues that consumers pay more than they should because of "hidden" interchange fees and that reducing these fees would result in lower retail prices.

However, in 2009, the U.S. Government Accountability Office (GAO) examined the issue of interchange fees in the U.S. and concluded that any remedies for reducing these fees have risks that may end up costing consumers more money than they pay today. Notably, the GAO report examined the experience after the Reserve Bank of Australia regulated interchange fees in that market, and concluded that retailers did not reduce prices to reflect their reduced interchange fees, something the Merchants Payments Coalition has suggested would occur if interchange fees were regulated in the United States.