Quayle said he believes the fees are necessary for banks to provide needed protections to cardholders and merchants.
"When anybody presents their card to a merchant, the merchant knows he's got guaranteed payment. ... He knows the bank is good for it," he said. "And there are many studies out there that demonstrate that customers will purchase more when they're using debit or credit, as opposed to using check or cash."
However, merchants have been taking a stand against the fees in recent years, and the federal government is one of those "merchants" involved in the skirmish.
The GAO study was conducted, in part, due to the growing use of credit and debit cards by federal entities, both as merchants and purchasers.
The study evaluated the disclosure and transparency of interchange fees and merchants' ability to negotiate them. It also looked at the costs and factors incorporated into interchange fees, and how those costs and factors vary among cards.
A report of the study's findings was released in June.
The GAO found that total costs of accepting cards has risen over time for merchants, as consumers are using cards more often. In fiscal year 2007, federal entities collected more than $27 billion in revenues through credit and debit card transactions and reported paying at least $433 million in merchant discount fees, which include interchange fees.
The GAO reported that many federal entities' card acceptance costs grew from 2007 to 2009 by millions of dollars, including those for the U.S. Postal Service, Amtrak and Treasury's Financial Management Service, as more federal entities began accepting cards to keep customers satisfied and prevent bad checks and cash thefts.
One of the most important findings of the study was that federal agencies have limited ability to control interchange fee costs. Although federal and non-federal entities have attempted to negotiate with card networks to lower interchange fees, the attempts ultimately failed.
According to the GAO report, various card network rules have been a major factor in limiting the ability of federal entities and merchants to negotiate the fees.
Visa, MasterCard, American Express and Discover - the major card networks - have acceptance rules that prohibit card users from imposing surcharges on cards; establishing minimum or maximum charges to run cards; or refusing to accept certain cards, such as rewards cards that higher interchange rates.
Although the GAO study carefully evaluated card networks' rules, the results were inconclusive and no easy solution was found to alleviate the interchange fee burden for merchants.
However, the GAO report did speculate that if interchange fees were lowered, card issuers would likely increase cardholder costs or implement costs that historically haven't been charged, offer less rewards, or curtail cardholder credit availability.
The same type of speculation is going on currently, due to a financial overhaul bill recently introduced by Congress to implement a number of financial regulations. The bill passed through the House in July, and is awaiting passage in the Senate.
Under the financial overhaul bill, the Federal Reserve would be given the authority to set pricing for interchange fees, and Quayle said it is likely that the fees would be significantly reduced.
"People that are smarter and more experienced than I am in digging into this have said that it's going to cut the interchange fee by 75 percent," he said, adding that the Bankers League is concerned the Federal Reserve won't consider the ways in which fees are used: setting up card networks, software development costs and card-reading computer installation costs.
He added that consumers will be the big losers if interchange rates are lowered.
"Theoretically, lowering the fees would shift the costs of electronic banking back to the consumer. We wish it weren't so, we hope it's not so. ... Free checking may go away, since there may be higher fixed costs in terms of servicing your average customer account that has an electronic card attached to it."
James Thurston, a spokesman for the Ohio Bankers League, agreed.
"Right now, the consumers win because they get the benefit of free checking, but they also get the protection and everything else through using their debit card," Thurston said.
"You have the retailers saying now that they are going to pass along savings, they are going to make the pair of jeans that they sell in the store less expensive. But when they did it (regulated interchange fees) in Australia six or seven years ago, quite the opposite was found to be the case."
He explained that, in Australia, merchants' prices have actually increased, and banks have reduced many perks for their customers.
"It was a lose-lose situation for consumers," Thurston said.
Robert Palmer, president and chief executive director of the Community Bankers Association of Ohio, said the association also opposes the financial overhaul bill's interchange provision.
"We do not believe that the government should get involved in (interchange) price setting," Palmer said. "We see this to be a very good marketing ploy by the retailers to convince Congress that the fees should be set lower.", JACKIE NASH, Daily Reporter Staff Writer, Copyright 2010, The Daily Reporter, 580 S. High St., Columbus, OH., The federal government has been working on financial reform, including
changing regulations in regard to credit cards, that they say will
benefit the consumer. Banking professionals warn that some of the
changes being considered could have the opposite impact., publish, open, , , Bankers say government involvement with interchange fees could hurt consumers, 2011-11-07 20:58:40, , 0, , Federal Government, Credit Card Accountability Responsibility and Disclosure Act of 2009, Government Accountability Office, GAO, Intercharge Fees, Credit Cards, Consumers, 0, 1, 1, article, 1, 0, 0, 2010-07-28, 2, 2">
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