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Table of Contents

Lead Story

PCI: The 'little engine that could' gains steam

News

Industry Update

Eureka! HMS has conference hosting down

Visa muscles to squelch risk

Interchange under attack

Visa identifies apps storing sensitive data

ISOMetrics:
Restaurants most vulnerable to data breaches

Features

Mind on the ATM money

Tracy Kitten
ATMmarketplace.com

Industry Leader

Kim Fitzsimmons –

Views

Payments: A very large space

Patti Murphy
The Takoma Group

Education

Street SmartsSM:
To certify or not to certify: That is the MLS question

Dee Karawadra
Impact PaySystem

What if my ISO tanks?

Adam Atlas
Attorney at Law

Ten myths muddling PCI mastery

Ross Federgreen
CSRSI

Statement analysis for cave men

Jason Felts
Advanced Merchant Services Inc.

Getting wise to wireless security

Joel and Rachael Rydbeck
Nubrek Inc.

Help desk quality check

Biff Matthews
CardWare International

Company Profile

WAY Systems Inc.

Premier Payment Systems

New Products

No-brainer protection on smart cards

Smart Card Guard
National Envelope Corp.

Fort Knox for merchant data

CardVault
3Delta Systems Inc.

A new Vu of IP device management

NetVu version 2.3
Precidia Technologies Inc.

Inspiration

What about you?

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

May 29, 2007  •  Issue 07:05:02

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Interchange under attack

It's almost a rite of spring: One or both of the card Associations implement new interchange fee schedules. This forces acquirers and processors to adjust their fees, and the retail sector cries foul.

This year, Visa U.S.A. rolled out a new interchange schedule, effective April 14. Within days, the National Retail Federation was rallying state lawmakers behind efforts to force major changes to interchange.

Many of Visa's rates remain the same as last year. However, Visa introduced a new card category - Signature Preferred - which raises interchange on some transactions.

MasterCard Worldwide also recently announced rate changes, effective April and June 2007. (For information on the latest rate changes from MasterCard and Visa, see The Green Sheet, issues 07:03:01 and 07:05:01, respectively.)

"When Visa and MasterCard [assess interchange], they don't take it on just the retail sale; they take it on the entire transaction, including the sales tax," Mallory Duncan said during the National Conference of State Legislatures' (NCSL) spring conference, April 19 in Washington, D.C.

Duncan is NRF Senior Vice President and General Counsel, and Chair of the Merchants Trade Coalition, a group of federal and state trade associations representing merchants who accept credit cards. He said retailers, who merely collect and do not retain sales taxes, are particularly irked that those funds are included in interchange assessments.

"The sales tax is the people's money, and [Visa and MasterCard] shouldn't be trying to take a piece of it," he said. "That drives up prices even higher, and everybody ends up paying a tax on a tax."

It also bothers merchants that monthly account statements from card servicing banks don't break out interchange costs, Duncan added.

The NRF and other members of the Merchants Trade Coalition have been railing against interchange since the so-called Wal-Mart suit opened to public debate this long-standing industry pricing mechanism.

Several coalition members were party to that lawsuit. It resulted in a multibillion-dollar out-of-court settlement and the elimination of rules that compelled merchants accepting MasterCard and Visa credit cards to accept all other card products bearing those brand names.

Merchants managed to get the ear of the U.S. Congress, which held hearings last year. But so far this year, interchange is not high on the agendas of any pertinent congressional committees.

For now, lawmakers are more interested in card issuers. Earlier this month, Sen. Carl Levin, D-Mich., took to the Senate floor to denounce card issuer fees and fee-levying practices. He also said he was introducing legislation to rein in such practices.

Legislation pending in several states, however, would cap or exclude interchange on certain transactions.

The Merchants Trade Coalition estimates that MasterCard and Visa collected about $36 billion in interchange during 2006. The group noted that this represents a 17% increase over 2005, and an increase of 117.5% since 2001.

At least a dozen bills pending in state legislatures address topics related to interchange, according to the NCSL. Here's a rundown of several key initiatives:

Whether this attention given to squeaky wheels will lead to a smoother ride for retailers remains to be seen.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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