Irked by Card Costs, Gasoline Exec Says It’s Time for Interchange Cap

A top official of a regional gasoline marketers' association who wrote a letter to Congress earlier this month calling for regulation of bank card interchange fees says he would like to see the federal government impose a cap on interchange. “They need to look at Australia [where banking regulators last year forced average bank card interchange down from 0.80% to 0.35%], though the cap might possibly have to be a little bit higher,” says Roy A. Turner, executive vice president of the Colorado-Wyoming Petroleum Marketers Association, whose 300 members retail 55% of all gasoline and diesel fuel sold in Colorado. Turner's Aug. 15 letter to U.S. Rep. Marilyn Musgrave, R.-Colo., decried rising interchange fees in the petroleum industry and solicited the congresswoman's help in lobbying for regulation (Digital Transactions News, Aug. 25). The letter, to which Musgrave has not yet replied, represented one of the first overt efforts by retailers to lobby Congress on what has become a hot-button issue for merchants this year. Turner says some of his members have also written to individual congressmen, while he and other association officials have met with the Colorado and Wyoming congressional delegations to encourage them to “at least look into interchange,” he says. The Washington, D.C.-based Merchants Payments Coalition, formed earlier this year by the National Retail Federation and other retail trade groups, has said pushing for regulatory relief on interchange costs is its prime objective. The Petroleum Marketers Association of America, of which Turner's group is one of 45 affiliated state and regional associations, says it has not lobbied for interchange regulation, preferring to work through the MPC. “When our members complain about the pain they're feeling, we encourage them to talk to their congressmen about it,” says Holly Tuminello, vice president of the Washington, D.C.-based association, which represents more than 8,000 independent marketers. A call to Musgrave's office from Digital Transactions News was not returned. Gasoline retailers have been caught in a squeeze since the price of gas began climbing earlier this year, driving up the absolute portion of each sale taken by interchange and other acquirer fees. At the same time, the price run-up has prompted more customers to use cards to cover larger tabs at the pump. Turner says 80% of his members' sales are now on cards, compared to 60% a year ago, while the toll taken by interchange and other transaction costs has climbed to 9 cents on a $3 gallon of gas. “Margins have been squeezed dramatically,” says the PMAA's Tuminello. “The credit card companies are making more margin off a gallon of gasoline than the [gasoline] marketers could ever dream of making.” Visa U.S.A. and MasterCard International, which set interchange rates, defend the pricing system as benefiting merchants in part by funding marketing efforts that bring in more business and lift average tickets. But Turner would like to see the card issuers rein in their marketing, particularly to bad credit risks. He blames bad underwriting decisions, which lead to higher credit losses for issuers, for rising interchange. “Credit cards are getting too easy to come by,” he says. “[Issuers] need to tighten their requirements up.”