N.H. House Considering Card Fee Legislation

Published in CSP Daily News

Bill would limit interchange rate to 1% for state-charted banks

John Hikel

CONCORD, N.H. -- A bill that would limit credit-card and debit-card fees has New Hampshire retailers and banks going head to head, reported the New Hampshire Business Review. House Bill 1319 would limit the interchange fee to 1% for state-charted banks.

The problem with such fees, according to the bill's sponsor, State Representative John Hikel (R), is that "as a merchant you don't know what that card is going to cost you." The fee charged depends on the kind of card used and what the person purchases.

For Hikel, who owns an auto repair shop, fees vary from 0.65% to 4.76%. Hikel alleges that the fee subsidizes various benefits to the cardholder, so "I end up paying for the customers' free gifts and miles," he told the newspaper.

Hikel only finds out the amount, he said, when he gets his credit-card statement.

For John Dumais, president of the New Hampshire Retail Grocers Association, the problem is simply the amount the retailer has to pay. Grocers run on a tight margin--about a 1% profit on food for larger chains and a half-percent for independent grocers. Gasoline is a loss leader, he said.

"It's a hardship when the cost is 3% and the profit is under 1%," Dumais testified in support of the bill, according to the report.

The average cost is closer to 1.75%, a spokesperson for MasterCard told the paper. That's the "blended rate" that merchants usually pay, though each deal with the merchant and his or her bank is different.

The bill would "undermine the free market" and "create an unlevel playing field," New Hampshire Bankers Association president Christiana Thornton told the Business Review.

Federal law already limits such fees--21 cents plus four basis points--but that is only for banks with $10 billion in assets. The limit does not apply to smaller banks based in New Hampshire, which, federally chartered or not, all have assets of less than $2 billion.

If the bill passes, there would be three sets of rules: a federal cap for large national banks, a state cap for small state-chartered banks and no cap for smaller federally chartered banks.

In New Hampshire, the federal cap applies to Bank of America, TD Bank, Citizens Bank and Sovereign Bank.

There are 18 state-charted banks in New Hampshire that would be affected by the state cap and six in the state that would not have any cap, the report said.

The fee, said Thornton, provides "only partial reimbursement to card issuers for the services they provide and the risks associated with these transactions." A price cap would not cover costs and "make it entirely likely that some smaller institutions will need to discontinue issuing debit and credit cards, just to avoid losses in this area."

Consumers will then move to banks that can offer those services, hurting the state's community banks, she said.