Vermont Is Poised to Become First State With a Card Interchange Law
Vermont might become the first state to enact a law regulating whether and how retailers pay card interchange fees.
Under a measure that both chambers of the Vermont state legislature have passed, merchants with a physical presence in the state would be free to refuse to accept cards as payment for purchases of less than $10. The legislation would also allow merchants to offer discounts for the use of cash instead of cards and to decide not to take cards at all of their locations.
The Vermont Credit Union Association reported to its members that the measure passed despite its strong opposition but said it was better than the legislation that had been originally proposed. For example, the original legislative language would have allowed retailers to set any limit they wanted on taking cards. Credit unions and other opponents were able to change the law to set the $10 minimum.
The association reported that Gov. Jim Douglas (R) was expected to sign the new law, but a spokesman for the Electronic Payments Coalition, which opposed the measure, was not as certain.
"This bill would force customers to carry cash and permit merchants to reject a customer at the register if they don't," said Trish Wexler, EPC spokesman. "A particularly striking example are those in Vermont who receive state benefits on prepaid cards. If they go to a convenience store to buy only what they need-a gallon of milk, a loaf of bread-they will be forced to buy more in order to use their card," she pointed out.
Once the measure makes it to his desk, Douglas will have five days to decide whether or not to sign it. A spokesman for the governor said he would not decide whether or not to sign until the measure arrives on his desk.
If he does sign the legislation, Vermont may be the first victory of a merchant effort on interchange that opponents charged has become steadily better organized and even multinational.
Speaking to credit union and CUSO executives at PSCU Financial Services annual forum, Bill Sheedy, Visa's president for the Americas, said that advocates of the current interchange system had noted the rising levels of cooperation among merchants groups in different countries.
"No sooner than a press release is dropped in Europe, we see it pop up in press coverage here," Sheedy said. "It's really quite remarkable."
The Vermont bill is headed for the governor's desk at roughly the same time that credit unions and other card issuers have had to muster to oppose several amendments to federal legislation that would do some of the things that the Vermont legislation would do if enacted.
One of the federal amendments would permit merchants to set a minimum or maximum transaction amount for payment by card, offer discounts for use of cash, check, debit card or stored-value card, and offer discounts to customers who use a competing card network. Vermont Sen. Patrick Leahy (D) sponsored that amendment.
The VCUA argued that Leahy's amendment would be worse than the state bill, which does not allow merchants to set a maximum for use of plastic, and limits the minimum to no more than $10. The Leahy sponsored measure allows both minimums and maximums with no limits, the association said.
The second amendment, sponsored by Illinois Democrat Sen. Richard Durbin, sets regulations to govern interchange fees on debit card transactions to assure they are "reasonable and proportional" to the cost incurred in processing the transaction (see article, page 6).