The Senate Mulls Easing Discounts for Non-Credit Card Payments

Payment card acceptance costs have been swept into the furious Congressional debate about credit card interest rates, fees, and terms. Late Thursday afternoon, a proposal was pending in the U.S. Senate that would give merchants greater leeway to offer customers discounts if they use cash, checks, or debit cards versus credit cards. Retailers support such a move, but the card networks and banks are lobbying against it. The passage of such an amendment to the credit card bill now before the Senate is by no means assured. The House of Representatives in April passed the Credit Cardholders' Bill of Rights Act of 2009 and sent it to the Senate. The chairman of the Senate Banking Committee, Christopher Dodd, D-Conn., is trying to meld the House version with his own card bill as well as manage amendments. Thursday's action focused on how many amendments Dodd may allow, with press reports out of Washington saying that he wanted to keep controversial interchange issues out so as not to jeopardize the highly popular issuer-related provisions. President Barack Obama is urging Congress to give him a credit card reform bill that he can sign by Memorial Day. Last year, a sweeping bill to regulate interchange failed in Congress. Some observers thought it would be back this year, but the House passed its card bill without an interchange provision. Now the Senate, while not making a frontal assault on interchange, is focusing on discounts for customers using just about any payment form except credit cards. While they permit some exceptions, in general the payment card brands ban credit card surcharges, insisting that merchants charge one price to all customers so that cardholders do not face price discrimination by merchants that want to pass on their acceptance costs directly to consumers. The chief backers of fewer restrictions on discounts are the assistant Senate majority leader, Richard J. Durbin, D-Ill., and Christopher “Kit” Bond, R-Mo. Earlier this week they floated one proposal and on Thursday afternoon modified it. Under it, card networks wouldn't be allowed to prohibit merchants from offering discounts for paying by cash, check, or debit card rather than by use of a credit card. Merchants also would have discretion to display or advertise the discounts. A spokesperson for the Electronic Payments Coalition, a lobbying group of card networks and banks, tells Digital Transactions News by e-mail that the new proposal still permits “deceptive surcharging.” She says the proposal “allows a merchant to 'discount' for everything except credit, display the 'discounted' price as the base price, and surprise the consumer with a higher price at the point of sale. For the consumer, this is a back-door surcharge, enabling merchants to achieve their goal of shifting their costs onto their customers.” But a spokesperson for the National Retail Federation says merchants want to be able to offer discounts for non-credit card payments. “We're pushing for this,” he says. “The tricky part is making sure people realize this is a cash discount rather than a credit card surcharge. It can take an education process.” Merchants in recent years have complained about the rise of interchange rates in general and that the proliferation of rewards credit cards, which carry higher interchange than plain-vanilla credit cards, has increased their payment card acceptance costs. There's another wild card in the mix, an unrelated amendment that would allow people to carry guns in national parks. The EPC spokesperson said late Thursday that the Senate card bill “was very much in flux.”