By Missy Baxter contributor
27 May 2010
Armed with a 1980s credit card imprinter, a Twitter account and a blog, retailer Mitch Goldstone is waging war on interchange fees. He’s a small business owner, equipped with an old machine and new social media tools, trying to tackle the giant credit card industry.
Last week, Goldstone was on Capitol Hill as sparks flew on the Senate floor in the debate over financial reform legislation. His goal: to help educate consumers, congressional leaders and the media about the difference between credit/debit card interchange fees and ATM surcharge fees, and the possible impact of various amendments attached to the sweeping financial reform bill.
"I took the old imprinter with me as a visual prop so that I could easily explain exactly what interchange fees are," said Goldstone, CEO of ScanMyPhotos.com, a California-based online retailer. "Interchange fees and ATM surcharges are entirely different, but they’re both very complicated topics. One U.S. Senator even admitted that he had no idea what ATM fees are because he has never used an ATM."
Surcharges and interchange rates are subjects Goldstone knows well. For the past five years, he has been the lead plaintiff in a huge class action lawsuit filed against Visa, MasterCard, Bank of America, Citibank, Bank One and other major banks. The suit, pending in U.S. District Court in the Eastern District of New York, alleges that the credit card companies and banks are violating U.S. antitrust laws and stifling competition by colluding to fix rates for interchange fees. Along with Goldstone, the plaintiffs in the case include numerous retailers and some of the nation’s largest merchant groups, such as the National Association of Convenience Stores.
Although Goldstone is an outspoken opponent of interchange fees and contends that Congress should impose restrictions to regulate credit/debit interchange fees, he, like many small business owners, is against government regulation of ATM fees.
"ATMs clearly notify customers about fees in advance and consumers can choose not to use an ATM if it has high fees," he said. "If I go to an ATM machine, it has a screen that tells me how much the fee is and I have to acknowledge that I read it. If it’s going to charge me $3, at least I know so up front and I have the option of not using it."
The scenario is entirely different with interchange fees.
"Visa and Mastercard’s interchange fees are hidden, under the radar of most consumers," Goldstone said.
"They cost small businesses and Americans billions of dollars each year," he said. "That’s why we filed antitrust lawsuit and that’s why Congress needs to step in and regulate interchange fees. They need to quit worrying about ATM fees because consumers can make their own choices about ATM fees."
Goldstone said interchange fees are "unjust," especially for online vendors who "have little recourse but to accept the fees" because the nature of their businesses requires they accept plastic. On small-order transactions, most of the sale is paid to the banks for processing the transaction. That’s particularly alarming, he adds, since consumers are increasingly using plastic for small-purchase transactions.
"Interchange fees are just a way that credit card companies squeeze merchants to enhance their revenue stream," he said. "There is absolutely no need for these fees to be so high, and without anything to control them, the banks and the credit card companies continue to find ways to escalate the fees."
Following last week’s Senate vote on the financial reform bill, Goldstone returned to California to continue his campaign against interchange fees, relying once again on old and new tools. He’s still "Tweeting" and blogging, while awaiting pending court dates for the class-action lawsuit.
"Along with other members of the retail industry, I am very hopeful that the U.S. judicial system will administer old-fashioned justice and rein in the credit card industry," he said. "Until then, I, unlike Jimmy Stewart, have a new social media forum –Twitter – to instantly reach millions worldwide. So, instead of ‘Mr. Smith Goes to Washington,’ I guess I’m more like a modern day Erin Brockovich going after the banks and Visa/MasterCard."
Attorney K. Craig Wildfang, a partner with Robins, Kaplan, Miller & Ciresi LLP, a national law firm representing Goldstone and other plaintiffs in the class action lawsuit, said no court dates are currently set on the case.
Since U.S. merchants and consumers pay billions of dollars in interchange fees each year, the lawsuit’s outcome is expected to have a major impact on the retail and banking industries.
Credit card companies contend that their interchange rates are fairly established and should not be regulated, but Wildfang, Goldstone and others argue that lower interchange rates would provide more revenue for consumer spending and could enable retailers to reduce costs, improve stores, add new merchandise or hire more employees.
"My company used to charge $5 to scan a photo, but now we only charge five cents because technology and efficiency have allowed me to lower my rates and pass along those savings to my customers," Goldstone said. "Technology has also made it easier and more efficient to process credit and debit transactions, but the credit card companies and banks haven’t passed down those savings to consumers. If they did, it could help boost the economy in many ways."
Original archived article:https://web.archive.org/web/20100610172301/http://www.atmmarketplace.com/article.php?id=12019