There's a debate playing out in Washington that is fascinating to watch even if the underlying issue isn't high on most consumers' radar. Suddenly, the loudest, nastiest, most-business-bashing rhetoric isn't coming from any of the usual suspects. It's coming from corporate lobbying groups on opposite sides of an amendment to the Senate's version of financial reform: language that would force changes in how merchants, banks, and Visa and MasterCard share the costs and benefits of so-called "interchange fees," a key part of the charges taken off the top when a consumer buys something with a credit or debit card rather than cash or a check.
In an op-ed last week at Investors.com, John Berlau of the Competitive Enterprise Institute gave the financial institutions' spin, and vilified some of the companies he said were behind the amendment by Illinois Democrat Dick Durbin. For good measure, he even managed to point out which side British Petroleum is on. (Hint: Not with Berlau's good guys.)
But a revealing speech Durbin made on the Senate floor shows that it isn't small businesses and consumers who would most benefit from Durbin's measure. The big winners would be some of the nation's biggest retailers, including one particular merchant that just happens to be in Durbin's home state, who would be allowed to shift their costs of processing credit and debit cards to consumers.
In his May 10 address, Durbin said he was moved to act after the CEO of Deerfield-Ill.-based Walgreen Co., the nation's largest drugstore chain, contacted him to bellyache about these costs.
"I had the CEO of Walgreens contact me last week," Durbin dramatically exclaimed, "and he told me that when they look at the expenses of Walgreens, ... it turns out the fees that Walgreens pays to credit card companies is the fourth-largest item of cost for their business."
In addition to Walgreens, some of the strongest advocates calling for direct and indirect price controls on these merchant fees — called the interchange fee — are some of the nation's biggest retailers. They include 7-Eleven, Home Depot and even British Petroleum, which in addition to the offshore drilling it is now infamous for also has a large presence in retailing through its gasoline stations.
Before you scream, "Man the barricades! Off with their heads," you may want to consider the other side's arguments about these fees, which Durbin's amendment would mandate be "reasonable and proportional" to the actual costs of transactions. You can find more about the Merchants Payments Coalition by clicking here.
Here's a sample of its rhetoric, offered today in response to what it called Visa's "Latest Desperate Swipe Fee Attack - A Misleading Push Poll":
"The same big banks and financial institutions that drove our economy into the ditch and needed a bailout are spending millions on a disinformation campaign to stop common-sense reform that will help small businesses and our customers," said Lyle Beckwith, Senior Vice President of that National Association of Convenience Stores, a member of the MPC. "But like much of what we get from banks and credit card companies these days, you’d better read the fine print."
"The poll released today on swipe fee reform was bought and paid for by VISA. Its findings are nothing more than one more cynical attempt by credit card companies and Wall Street banks to protect their swipe fee cash cow."
"This poll asks a series of deliberately misleading questions designed to elicit a predetermined response—it’s a VISA push poll, plain and simple.
"The Durbin amendment would not force consumers to pay to own or use their debit cards. The credit card industry knows this, and the big banks know this. But if we’ve learned one thing during the financial reform debate it’s that VISA and Wall Street will spend whatever it takes and say just about anything to protect the skyrocketing hidden fees that are making them billions.
"More than 5 million consumers across the United States have signed petitions calling on Congress to reform these unfair, hidden fees. This is about lower prices for them and a fair shake for the small businesses in their communities.
"Be wary of credit card companies peddling numbers that seem too good to be true—because the truth is usually hidden somewhere in the fine print."
Corporate-bashing populism isn't dead. Apparently they're teaching it in lobbyist school.