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WASHINGTON – The different sides in what might become a public policy and legal brawl over the U.S. credit and debit card system have begun to stake out their positions. Retailers hope the more than 40 lawsuits they have filed against Visa and MasterCard will give them the traction they need to get the debate underway and Visa and MasterCard have reorganized in an attempt to prepare for the legal wrangle. Now, Americans for Consumer Education and Competition, a consumer organization which is funded in a large part by Visa, has opened the public policy front by publishing a survey which shows that American consumers might take a dim view of any move which would see them charged extra for using their credit or debit card at the cash register. Some card analysts believe that such policies may be one outcome of a coming interchange fight and that Visa and MasterCard have begun to lay the ground for their eventual argument that consumers would not support that sort of policy. The survey of 1,000 consumers conducted in the middle of January 2006 indicated that 89% of consumers would consider it “unfair” for merchants to charge a separate fee for transactions consumers conducted with their credit or debit card and would not patronize those retailers again. The survey also asked if consumers had ever been charged such a fee while shopping (yes 16%/no 84%) and, if they had been, whether the experience left them with a positive or negative view of the business (negative 62%, no impact on your view 31%, positive 4%). And although 54% of consumers who had been charged such a fee said they went forward and completed the purchase anyway, 62% of those who had not been charged a fee said they would not complete the transaction should they face such a fee. “Consumers who pay with plastic shouldn’t be discriminated against for preferring an easy and safe choice of payment.” stated Susan Molinari, national chairman for ACEC. “Consumers clearly prefer to use their debit card these days over cash for purposes of convenience and security and they’re not going to tolerate an unfair check out fee that hampers this unstoppable trend toward electronic payment. This is the 21st century. We are buying items through the Internet, paying bills and banking online and buying goods at our local stores with the swipe of a card.” According to ACEC, a number of states, including California, Colorado, Texas, Oklahoma, Connecticut, Florida, Kansas, Maine, and New York, ban surcharging or “check out fees” for consumers who pay with plastic. New Hampshire specifically bans surcharging by travel companies and Kentucky bans surcharging by restaurants for tips if they are included on a credit transaction. But Craig Shearman, spokesman for the National Retail Federation dismissed the survey as a “bogus” effort that was “bought and paid for by Visa.” The truth is that consumers have been paying an additional charge for using their credit and debit cards (interchange) for years but retailers have been explicitly forbidden from sharing that with consumers, he contended, while adding that the NRF had never surveyed consumers on the issue. But Rebecca Reid, executive director of ACEC countered that the group could not have “fixed” the survey’s answers and that if they had asked the question differently it might have come out even more against the fees. Reid said she really believed that if surveyors described for consumers the details of what interchange fees paid for – that they support a gigantic network that allows for millions of credit and debit card transactions to occur daily and provides security to both the merchant and the customer and that those businesses that offer credit and debit as a purchase option generally make more in revenue – consumers would come down even more strongly against the fees. One factor that is beginning to have an impact on the discussion is a study that Datamonitor, an international business consulting firm, conducted of the Australian credit and debit card markets in the wake of a round of interchange changes the country went through in 2003. Interchange in Australia, Global Implications found that the interchange schedule that the Australian government imposed in late 2003 hurt consumers and did not significantly lower prices. Consumers were damaged by the policy in the form of higher fees and interest rates on their cards, weakened and more expensive card rewards programs and by not seeing the correspondingly lower prices that the government predicted lower interchange rates would bring. Australia’s experience has bearing on the discussion in the U.S. because it is among the first nations to have undertaken the sorts of sweeping changes to the interchange portions of their card industry. Interested parties on both sides of the interchange debate in the U.S. have looked to Australia for information on what interchange changes could bring if it were enacted here. “While the Reserve Bank predicted lower prices at the check out as a result of the credit card interchange reforms as yet there is no evidence that prices have actually been lowered,” Datamonitor’s 2005 report asserted. [email protected]

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