Visa Settlement in New Zealand Proves U.S. Interchange Fee Reform is Possible 

The Retail Industry Leaders Association (RILA) today cheered news from New Zealand’s Commerce Commission that it has reached a settlement with Visa regarding interchange fees. The agreement will bring greater transparency to Visa consumers and retailers in New Zealand who use and accept debit and credit cards. The move highlights the need for interchange reform here in the United States.

Interchange fees, which are imposed by the card association and banks to process the credit and debit card transactions, have tripled in the United States since 2001 to $48 billion last year and amount to a hidden tax on consumers. In today’s complex marketplace, interchange rates are the only expense that retailers cannot negotiate and have continued to skyrocket while other transaction costs decrease over time with economies of scale and advances in technology. 

“Regulators around the world have closely scrutinized anti-competitive practices related to interchange fees by Visa, MasterCard and other card associations and have come to the realization that these fees are bad for consumers and retailers,” said John Emling, senior vice president for government affairs. “U.S. regulators must follow suit to prevent these credit card giants from continuing to impose soaring costs on retailers small and large.” 

U.S. interchange rates among the highest in the world, averaging between 2%-3% of every swipe transaction.

“American retailers and consumers deserve the same fair treatment that Visa now offers in New Zealand,” added Emling.

According to the release issued by New Zealand’s Competition Commission, the settlement with Visa will ensure that: 

• Credit card issuers will now be able to set the interchange rates individually that will apply to transactions using their credit cards, subject to maximum rates determined by Visa. These rates will be publicly available.
• Merchants will no longer be prevented from applying surcharges to payments made by credit cards or by specific types of credit cards. Merchants will also be able to encourage customers to pay by other means.
• Visa has confirmed that non-bank organizations or companies that might wish to provide acquiring services to merchants are permitted to join the Visa network as acquirers if they meet relevant financial and prudential criteria.

While this action by New Zealand’s Commerce Commission is an important first step, the Commerce Commission has ongoing claims against MasterCard and several in-network New Zealand banks for equally egregious restrictive trade practices, and it does nothing for U.S. retailers and consumers.

Legislative proposals under consideration in the United States addressing interchange fees include the Credit Card Fair Fee Act (H.R. 2695/S. 1212), which would allow retailers to negotiate interchange fees, and the Credit Card Interchange Fees Act (H.R. 2382), which would bring transparency and competition to interchange rates. In addition, Congress will turn its attention this fall toward broader regulatory reform of our financial system.

The Retail Industry Leaders Association (RILA) promotes consumer choice and economic freedom through public policy and industry operational excellence. Its members include retailers, product manufacturers, and service suppliers—which together provide millions of jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

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