IACS Joint Letter

October 20, 2009

Dear Representatives,

The biggest banks and credit card companies have used the power they wield in the marketplace to push unfair business practices that are costing our members—retailers and individual consumers—tens of billions of dollars each year.

The banking industry has moved steadily over the last several years to impose more burdensome penalties and fees on their customers–ratcheting up interest rates as high as 30 percent and charging outrageous fees. Many of these practices have put consumers in financial peril and, far too often, pushed them into bankruptcy. At the same time, the industry has dramatically increased credit card swipe fees that they charge retailers. All banks charge the same schedule of swipe fees which drives up the costs of nearly everything consumers buy, including necessities such as gasoline and food, and removes the competitive pressure to reduce the fees.

In fact, the ways in which large banks mistreat consumers and merchants are very similar. With respect to credit cards, for example, these banks impose unreasonable terms that are too complex for most to understand and result in higher costs. They present those terms as take-it-or-leave-it offers and then change those terms at their convenience – without consumers or merchants having any say in the matter. Yet the power of these banks working together as one under the umbrella of the major credit card networks means that not only consumers but merchants small and large have no choice but to accept this mistreatment.

Not only that, but these abuses are inter-related. By abusing consumers and merchants, the credit card industry has created a business model based on the generation of bank fees rather than sound underwriting. The ever-riskier lending activities that resulted from banks viewing their all of their customers as fee-generating machines were part of the genesis of our financial crisis. In spite of these profound, related problems, the federal agencies that are responsible for protecting Americans from the financial industry’s worst abuses have failed to use their authority to stop the anticompetitive, deceptive and unfair practices that have become standard in the industry. It is time for us to bring that vicious cycle to an end and protect against the abuse of consumers and merchants as well as prevent future crises.

To change this inherently unfair business model requires action to protect against unfair abuses of both groups of bank customers – consumers and merchants. Leaving either group unprotected from these abuses not only disadvantages that group, but keeps in tact the banks’ incentives to find new ways to circumvent reform and abuse the other group as well. Given the relationship between these different unfair practices that have become central to banks’ business models, we urge you to support two separate pieces of legislation that are key pieces to reforming the abuses plaguing this system. These are:

  • The Consumer Financial Protection Agency Act of 2009, H.R. 3126, sponsored by Rep. Barney Frank (D-MA); and
  • The Credit Card Interchange Fees Act of 2008, H.R. 6248, sponsored by Rep. Peter Welch (D-VT) and Rep. Bill Shuster (R-PA).

These pieces of legislation are important steps toward ending the abusive banking practices that drain billions of dollars from consumers and merchants each year. We hope you will support and quickly pass them.


Americans for Financial Reform
National Association of Convenience Stores

Click here to download a copy of this letter (doc).