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WASHINGTON — The U.S. Department of Justice has sent a letter to a U.S. Representative signaling its disapproval of a proposal to give the power to set card interchange to a panel of judges.
Writing Rep. Lamar Smith (R-TX) about HR 5546, the so-called Credit Card Fair Fee Act of 1998, Deputy Assistant Attorney General Kieth Nelson expressed doubt that such a bill would do consumers any good.
“First, this bill may actually harm consumers, not benefit them,” Nelson wrote. The credit and debit card markets are complex, so-called "two-sided" markets in that each network needs to attract both cardholders and merchants. Pricing on one side of the market impacts the pricing on the other side.
“For example, newspapers charge less to readers in order to increase sales and circulation, thereby making their paper more attractive to advertisers. Revenues from advertisers support the lower prices to readers. Similarly, credit card networks forced by regulation to collect less from merchants may well respond by charging more to cardholders in card fees, or reducing card rewards programs and other features that are attractive to consumers,” he added.
