Restaurants and other retail businesses have fought for 20 years to reduce the fees they’re charged for accepting credit card payments from patrons. Why, then, weren’t they exchanging high-fives when MasterCard and Visa announced last week that they’d be willing to lower the processing levies known as swipe fees?
This week’s episode of the Working Lunch political-affairs podcast provided the explanation.
“There is nothing to celebrate in this,” guest Doug Kantor, general counsel of the National Association of Convenience Stores, declared to podcast co-hosts Joe Kefauver and Franklin Coley.
Kantor has been on the forefront of the fee-reduction struggle for the full two decades. Contrary to what an initial assessment might have suggested, the offer posed by the card companies just isn’t good for merchants.
For one thing, Kantor said, the credit giants offered to roll back just one of the two charges that figure into processing costs. The other levy will be left as is, he noted, meaning the reduction in swipe fees would be very slight.
It’s also temporary, with rollbacks lasting just a set number of years before they can be reversed.
In addition, Kantor said, the agreement does not alter the setup that allows MasterCard and Visa to virtually dictate their rates. The restaurant and retail industries have been pushing for legislation that would permanently alter the system by fostering new competition for the credit giants. A law currently before Congress would require that institutions other than the big two be allowed to process customers’ charges, ending their lock on the market.
The changes not only stop short of what merchants want, but are also temporary, Kantor noted. Under MasterCard and Visa’s offer, fees would be rolled back just for several years.
He characterized it as a ruse: “’We’re going to pretend to give you a little relief. And then we’ll go back to business as usual,’” said Kantor. “It’s a little getting a kiss on the cheek while being stabbed in the back.”
In any case, the agreement proposed by MasterCard and Visa requires the approval of the federal court that's hearing a lawsuit filed against the card companies by a cross section of businesses that depend on credit card payments.
"We’re months and months away from the court deciding, 'Is this settlement okay or not?'" said Kantor.
To learn what credit-card reforms would be preferred by restaurants and other merchants would prefer, and what the chances are of winning those concessions, give the podcast a listen.
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