Massachusetts banks and credit unions argued in support of interchange fees on credit card transactions to a state committee earlier this week.
The financial sector highlighted the benefits of the electronic payment system and discussed the role of interchange in fraud protection, cybersecurity and consumer benefits. Interchange fees fund the processing of transactions, but also fund fraud protection, secure transactions and support credit risk.
Business owners say that the post-pandemic rise in the popularity of electronic payment methods has led to a greater number of those transactions being processed. That in turn means the interchange or swipe fees charged for processing a credit or debit card payment add up to billions of dollars annually and have become a burden for small businesses and restaurants in particular. Consumer advocates say the added costs are often passed on to customers, even if indirectly.
“Every time a consumer taps their card at a local business, the consumer believes three things: their information is safe, their money is safe and if something goes wrong someone will make it right. This is the foundation of modern commerce,” Hanscom Federal Credit Union President and CEO Peter Rice said in a statement. “When the fraud occurs, community financial institutions answer the phone, investigate the claims, absorb losses and restore confidence.”
Led by Financial Services Committee co-chairs Rep. James Murphy of Weymouth and Sen. Paul Feeney of Foxborough, the commission held its fourth hearing to accept testimony Monday, plans to hold additional hearings, and is accepting written testimony until July 31.
“Hopefully, we’ll make some progress after we conclude the hearings. We’re not quite sure when we’ll conclude the hearings. We opened them up to see if people want to testify, and so we’ve had four. There’s been a lot of interest in the subject matter, both in person and I know people are watching online, so we’re going to keep the hearings going as long as people want to talk to us,” Murphy said Monday as the hearing got started.
Massachusetts is one of just a handful of states that does not allow businesses to surcharge customers for paying with electronic means.
“Bills to withhold interchange would only apply to Massachusetts state-chartered institutions and put them at a competitive disadvantage,” Capital One Head of Global Enterprise Affairs Andy Navarrette said in a statement. “It would also be incredibly disruptive to consumers, many of whom have credit cards with national banks and debit cards with a community bank. Customers expect and deserve all of their cards to work the same way, everywhere, every time.”
Information from the State House News Service article by Colin Young was used in this report.
