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U.S. Treasury’s Financial Management Service Concludes: Federal Government Should Negotiate, Not Regulate

June 14, 2010

WASHINGTON, June 14 /PRNewswire/ — The Electronic Payments Coalition issued the following statement in response to today’s release of a report on interchange fees paid by the federal government from the U.S. Treasury’s Financial Management Service entitled “Treasury Report on Credit and Debit Card Interchange and Other Fees, June 2010:”


    This report confirms that there are opportunities in the free market to
     negotiate what any merchant - including the federal government - pays
     to accept debit and credit cards.  The report lays out a roadmap of
     suggestions that could save the Federal government as much as $39
     million annually.  Conspicuously absent from this roadmap was any
     recommendation of regulation or legislation to achieve this objective.
     Further, the report specifically recommends no changes to the existing
     infrastructure:

                 "Treasury believes that any strategy to negotiate reductions
                 in the Federal government's interchange costs must be
                 achieved within the current card processing infrastructure,
                 without substantive changes to systems and work flows." (p.
                 2)


    The federal government recognizes the benefits that they derive from
     accepting cards as payment.  In 2008, the U.S. Government
     Accountability Office issued a complementary report that speaks to the
     benefits the government receives by accepting debit and credit.(1)  The
     report showed that, through the acceptance of debit and credit, the
     federal government has been able to improve the efficiency and
     management of U.S. tax dollars through reduced costs associated with
     bad checks and even cash thefts.  According to the Federal Reserve,
     check acceptance was one of the most expensive forms of payment
     acceptance, as 187 million checks bounced in 2006, for a total value of
     $210 billion.(2)

    While the FMS report was focused only on debit and credit acceptance
     expenses, this previous report by the GAO highlighted the cost savings
     and revenue increases as a result of card acceptance.  Entities such as
     Amtrak, the U.S. Postal Service, and the U.S. Mint reported increased
     revenue - particularly online - due to debit and credit card
     acceptance.  The report also details that FMS officials in 2008 had
     identified various improvements that would result in ongoing cost
     savings.

    In a November 2009 report, the GAO further concluded that regulation of
     interchange fees, as has been proposed in Congress, would result in
     harm to consumers, small financial institutions, and even merchants
     themselves - such as the federal government - if doing so resulted in
     reduction of availability of credit and reduced retail sales.(3)

    Like any other expense the government - or any business organization -
     pays in the course of doing business, being proactive in negotiating
     all business expenses can improve bottom line results.

About Electronic Payments Coalition

The Electronic Payments Coalition is dedicated to protecting consumer value, choice, and competition in electronic payments systems. The coalition is a broad-based group of payment card networks, financial services companies, and financial services trade associations whose primary goal is to educate policy-makers, consumers, and the media about the value of electronic payments systems — including economic growth, convenience, speed, reliability, and security — and to ensure the continued growth of global commerce by promoting consumer choice and the stability of the vast payment networks that connect millions of consumers with millions of retailers each and every day.

(1) Source: U.S. Government Accountability Office, May 2008

(2) Source: The 2007 Federal Reserve Payments Study, December 2007

(3) Source: GAO, Report to Congressional Addressees, November 2009

SOURCE Electronic Payments Coalition


Source: newswire



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