NEWS RELEASE
May 15, 2008
ABA Media Contact: Peter Garuccio   
(202) 663-5452
E-mail: pgarucci@aba.com

ABA STATEMENT ON GOVERNMENT ACCOUNTABILITY OFFICE (GAO) REPORT ON INTERCHANGE FEES PAID BY FEDERAL ENTITIES

by Kenneth J. Clayton, senior vice president, card policy

            "The conclusion drawn by the report issued by the GAO today reinforces what we have said repeatedly.  Using payment cards – both credit and debit – brings considerable benefits to all parties of the transaction and that interchange revenue is necessary to reimburse issuers for the costs associated with making these benefits available.  Just like merchants all across the country, federal entities that accept credit and debit cards experience more satisfied customers, guaranteed payment, fewer losses from bad checks and cash thefts, and improved operational efficiency.  It is a system that works and works well.

            "The GAO report makes clear that while card payments to federal entities have significantly increased in recent years, due merely to the increased use of cards by consumers, interchange rates themselves have remained relatively steady.  The report also identifies ways in which entities can try to reduce the fees associated with card transactions.  These include negotiating with card networks for lower interchange rates, replacing manual card machines with wireless terminals, expanding PIN-based debit capabilities, and switching to more efficient ways of connecting to card networks when processing transactions.

            "Most importantly, the GAO report concludes that while data on the effects of interchange price controls attempted by other nations is limited, in some cases – particularly Australia – the result has been reduced costs for merchants but increased costs for consumers.  In fact, a recent report issued by the Reserve Bank of Australia states that there is no concrete evidence that merchants have passed on their cost savings to consumers in the form of lower prices.

            "Policymakers should consider the findings of the GAO report that there are lessons here for the broader interchange debate: the many benefits merchants receive from accepting payment cards come at a cost and intervening in this properly functioning market by establishing artificial interchange rates will hurt consumers."

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For more information on interchange visit www.electronicpaymentscoalition.org

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry's $12.7 trillion in assets and employ over 2 million men and women.