Treasury Report Cites Benefits to Government from More Interchange Regulation
The U.S. Government could save between $36 million and $39 million in interchange fees annually if it had the right to negotiate for better terms, according to a Treasury Department report.
This year Congress is not expected to take up legislation that would allow the government to negotiate these interchange fees. But the interchange issue has come up as House-Senate conferees are reconciling versions of the regulatory restructuring bill. The Senate bill contains an amendment allowing the Federal Reserve to set certain interchange rates.
Interchange and related card fees cost the government more than $116 million, according to the report and it could save between 45 cents and 49 cents per transaction if the Treasury Department could negotiate for better rates, the report said.
While the government benefits from some favorable rates those rates are "applied neither consistently across all transactions nor equitably across the payment networks."
In contrast to the federal government, some state governments have said that cutting interchange fees would hurt them because card companies use the revenues from interchange fees to subsidize providing prepaid cards for little or no costs to state governments.
The conference committee is scheduled to take up the interchange amendment next week and the Treasury Department report is one of the subjects scheduled to be discussed at a hearing on interchange before a Senate Appropriations Committee's Subcommittee on Financial Services tomorrow.