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Hidden Credit Card Fees Interchange Fees Cost Consumers Billions Each Year Executive Summary Consumers pay billions in hidden fees each year that are not listed on credit card receipts, bank statements or any other payment record. The most costly of these secret charges goes by various names such as “interchange fees,” “discount fees,” “checkout fees” or “convenience fees.” In 2004 alone, Visa, MasterCard and the banks that own them collected $27.6 billion, American Express $7.2 billion and others such as Diners Club and Discover $5.2 billion — totaling $39.2 billion (see Figure 1). The card companies and banks charge a fee on every single transaction. Retailers pay them. But as the fees increase and card use explodes, the costs must be passed along to consumers in the form of higher prices for all products. In fact, all consumers pay — even those who do not use plastic — because they all pay the same prices for products. The average household paid more than $230 in hidden credit card fees in 2004. Hit hardest are low-income families, including many minorities, who depend on every dollar to survive. Families who pay by cash or check, in fact, subsidize the bonus-point awards programs that only the richest consumers can afford. These consumers use gold and platinum cards, which cost retailers and consumers the highest interchange rates. These fees are becoming the fastest-rising and most uncontrollable cost for retailers. Over half of supermarket shoppers now buy groceries with plastic; the fees can be two times or more a company’s net profit, particularly among the smallest food retailers. Interchange rates in the U.S. far exceed actual transaction costs. The fees per transaction continue to rise despite dramatic increases in the number of plastic payments and dramatic decreases in the cost of computer communications. The U.S. leads the world in productivity and efficient use of technology, yet American consumers pay the highest interchange rates among industrialized nations. Americans are not receiving the benefits of economies of scale, innovation and competition, along with continuing low inflation and interest rates. Card companies and banks ignore these benefits when fixing the fees. Investigations in Australia, the United Kingdom (UK), European Union (EU) and elsewhere are documenting the disconnect between the fees and actual costs. Australia responded by capping the credit card rate at 0.50 percent — less than one-third the average rate in America. The EU is capping Visa rates on cross-border transactions at an average of 0.70 percent. The UK is calling for reductions after finding that MasterCard rates are “unjustifiably high” and discriminate against poorer consumers. Consumers pay billions in hidden fees each year that are not listed on credit card receipts, bank statements or any other payment record. Hit hardest are lowincome families, including many minorities, who depend on every dollar to survive. Investigations in Australia, the United Kingdom, European Union and elsewhere are documenting the disconnect between the fees and actual costs. Food Marketing Institute (FMI) conducts programs in research, education, industry relations and public affairs on behalf of its 1,500 member companies — food retailers and wholesalers — in the United States and around the world. FMI’s U.S. members operate approximately 26,000 retail food stores with a combined annual sales volume of $340 billion — three-quarters of all retail food store sales in the United States. FMI’s retail membership is composed of large multi-store chains, regional firms and independent supermarkets. Its international membership includes 200 companies from 50 countries. 655 15th Street, N.W., Washington, DC 20005 202.452.8444 fax: 202.429.4519 fmi@fmi.org http://www.fmi.org Hidden Credit Card Fees In today’s plastic marketplace, consumers pay ATM fees, late fees, over-the-limit fees, zero-balance fees and inactivity fees. Many people resent these fees and believe they are unwarranted or too high, but at least they know about them. They have a right to know about hidden interchange fees as well, and the fees should be fair and based on actual costs that are transparent to consumers and retailers. Figure 1. Electronic Payment Fees Cost Consumers, Retailers Nearly $40 Billion in 2004 $25 $21.2 B $20 $15 $10 $6.4 B $5 $7.4 B $5.2 B Background $0 In 2003, how U.S. consumers pay for Visa/MC Credit Visa/MC Debit Amex Other goods and services crossed a historic Source: Nilson Report, May 2005, Issue #833 milestone as electronic payments exceeded check payments for the first time.1 This milestone signals that plastic is becoming the predominant currency of commerce. Although cash and checks are not likely to disappear soon, the former is now relegated to small transactions while check use is steadily declining. In 2004, debit and credit cards were used in over three-quarters of all electronic transactions — 34.4 billion — costing retailers and consumers nearly $36.5 billion in electronic payment fees.2 By contrast, banks charged about one-tenth as much to process as many checks.3 In 2003, how U.S. Checks cost much less because the Federal Reserve mandates that they consumers pay for goods be processed “at par,” meaning at face value with no fees subtracted. and services crossed a Fees may be assessed separately to cover transaction costs. historic milestone as Most of the card transactions today are one of three types:4 electronic payments Credit — The customer’s card account is queried to verify it exists. exceeded check payments The retailer is assessed a fee based on the percentage of the transaction — for the first time. This up to 2.7 percent depending on the type of retailer and credit card. About milestone signals that one-quarter of that fee covers the processing costs of the retailer’s bank. The balance constitutes the so-called interchange fee, which goes to the bank that plastic is becoming the issued the card. The customer receives a statement at the end of the month predominant currency of commerce. and pays the full amount or part of the unpaid balance. Signature/Offline Debit — The customer’s account is queried to verify the purchase can be covered. The transaction is held offline, and then transferred from the customer’s bank account to the retailer’s within two business days. The 1 Federal Reserve System, The 2004 Federal Reserve Payments Study — Analysis of Noncash Payments Trends in the United States: 2000-2003. 2 Nilson Report, May 2005, Issue #833. 3 Federal Reserve System, op. cit., p. 3. Check processing cost $3.6 billion in 2003, according to the Boston Consulting Group, “Payments Economics 101.” 4 In other electronic payments, consumers use automated clearing house (ACH) cards issued by retailers; the bank processing costs are minimal. Consumers now redeem most Food Stamps with electronic benefit transfer (EBT) cards; in some states, they can use EBT cards to buy products under the Women, Infants, and Children program. Food Marketing Institute 2 Hidden Credit Card Fees retailer is assessed an interchange fee Figure 2. Number of Card Payments at the Checkout from $0.35 for a supermarket transaction (billions) to about 2 percent for other merchants. 40 PIN/Online Debit — Funds are Signature Debit withdrawn instantly from a checking ac35 PIN Debit count after the customer enters a personal Credit 30 11.8 identification number or PIN. The retailer 9.8 25 is assessed a $0.17-$0.50 fee. Some 8.2 banks charge customers a fee as well, 20 6.7 6.8 5.4 from $0.10 to $2.00.5 This fee appears on 4.5 3.2 15 the customer’s bank statement as a bank 10 or convenience fee, or the retailer is listed 16.2 14.8 13.9 13.2 as the payee even though the retailer nei5 ther assessed nor received the fee. 0 As a condition of accepting credit 2001 2002 2003 2004 and debit cards, retailers are not permitTotal 23.1 26.6 30.0 34.8 ted to assess a surcharge to reveal or reYearly Growth 15.2% 12.8% 16.0% cover the interchange fees on Signature Debit 22.4% 19.5% 20.4% transactions. This restriction is part of PIN Debit 40.6% 20.0% 25.9% Credit Card 5.3% 6.5% 9.5% the card rules that retailers must adhere Note: 2004 data are a projection. to. The rules run more than a thousand Source: Federal Reserve System, Report to the Congress on the Disclosure pages, governing every detail of elecof Point-of-Sale Debit Fees, November 2004 tronic transactions — from audits to record-keeping to processing practices to penalties for failing to comply. Retailers are not even allowed to see much less obtain a copy of these mammoth regulations. The card companies regard them as proprietary secrets, informing merchants of limited provisions only when they are compelled to, such as measures to prevent identity theft, or when the rules are violated, invoking fines. In 2005 after other countries forced MasterCard to publish the rules governing transactions in their markets, it disclosed excerpts of the regulations for the U.S.6 The Questionable Basis for Interchange Fees The volume of electronic transactions has increased dramatically in recent years (see Figure 2). Since 2001, debit card use has surged by more than 20 percent a year. Economies of scale, competition, plummeting computer costs, low interest rates and inflation, and decreased fraud, however, are not driving down payment fees. In fact, the fees for most transactions have increased over the past 10 years (see Figure 3). There is no apparent cost justification for any increases. Banks and card companies acknowledge the fees are not based solely on communications costs. Many of the expenses they cover do not provide clear benefits to consumers or retailers. The fees help subsidize the marketing to entice consumers to use more cards, to use them more frequently and to charge more good and services. Federal Reserve System, Report to the Congress on the Disclosure of Point-of-Sale Debit Fees, November 2004, p. 17. 6 Visit http://www.mastercardmerchant.com/accept_mastercard/merchant_rules.html to view MasterCard’s Merchant Rules Manual. 5 Economies of scale, competition, plummeting computer costs, low interest rates and inflation, and decreased fraud, however, are not driving down payment fees. Food Marketing Institute 3 Hidden Credit Card Fees The inducements include reward points and rebates and no annual card fees. Retailers counter that consumers have a fixed amount of disposable income. Increased purchases at some outlets are offset by decreases elsewhere. As plastic becomes the predominant form of payment, net increases reflect inflation. In the supermarket industry, the weekly family grocery bill has not changed over the past five years, and, when adjusted for inflation, has declined.7 Furthermore, with cards and card offers proliferating, this hypermarketing is unnecessary. In 2004, U.S. consumers received 5.23 billion mail solicitations for credit cards alone, after receiving 4.29 billion the previous year.8 Visa explains why people are deluged with card solicitations: 10 mailings are now required to sign up new customers — up from two mailings when cards were less widely held.9 One can reasonably ask if such marketing is needed, especially when people today carry an average of 4.8 credit cards.10 Whether or not one agrees with the card marketing frenzy, retailers and consumers should not help subsidize it with interchange fees. And customers who pay by cash or check— payments that are not subject to large processing fees — should not help underwrite these card campaigns as well by pay- In 2004, U.S. consumers received 5.23 billion mail solicitations for credit cards alone, after receiving 4.29 billion the previous year. Figure 3. Typical Interchange Fees Paid by Supermarkets for Credit and Debit Cards 1994 Visa Credit 1.00% 1995 1.10% 1.10% 1.08% 3.10% N/A $0.10 1997 1.15% 1.15% 1.15% 3.10% $0.36 $0.10 1999 1.20% 1.20% 1.22% 2.30% $0.36 $0.15 2001 1.20% 1.20% 1.24% 2.10% $0.40 $0.15 2002 1.20% 1.20% 1.26% 2.10% $0.40 $0.24 2004 1.24% +$0.05 1.36% 1.26% 2.10% $0.35 $0.25 2005 1.65% 1 +$0.10 1.43% +$0.05 TBD TBD $0.35 $0.173 $0.50 MasterCard Credit 1.00% Discover Credit $.52 Amer. Exp. Credit 3.10% Signature Debit Pin Debit 2 N/A $0.08 Note: These are the rates paid by most supermarket companies. Visa now offers rates in three tiers or “thresholds” based on the annual number of transactions and card dollar volume. Threshold III, for example, begins at 6.6 million transactions and $330 million in card volume, while Threshold I rates apply to companies with at least 39 million transactions and $2.2 billion in Visa card sales. 1 This rate applies to the proliferating cards that feature reward programs, and to the Visa Signature credit card. The 2004 rate still applies to cards that do not offer such programs. 2 For supermarkets, these rates are set as a percentage of the transaction with caps. The caps increasingly do not apply when customers use debit cards linked with reward programs. 3 These fees are set by the card companies and regional debit transaction networks, which charge different rates. Banks can control which networks are used, often routing transactions through the networks that charge the highest fees. 7 FMI, Trends in the United States: Consumer Attitudes and the Supermarket, 2004, p. 53, U.S. Grocery Shopping Trends, 2005, p. 31. 8 Federal Reserve System, The Profitability of Credit Card Operations of Depository Institutions, June 2004, p. 5. 9 “Visa Charges Ahead,” Time magazine, March 14, 2005, p. A6. Food Marketing Institute 4 Hidden Credit Card Fees ing the higher retail prices needed to cover the interchange costs. The fees are said to cover the risk of fraud. Most of the debit fraud losses result from easily forged signatures on cards that are not PINprotected. Yet banks and card companies are inducing customers to use the less-secure signature debit cards, no doubt because these payments generate higher interchange fees. At the same time, they are increasing PIN-debit fees for retailers and starting to charge consumers even though these payments cost the least and are password-protected from fraud. Retailers and consumers benefit most from the lower-cost and more secure PIN-debit cards. They should not help subsidize less secure and more costly signature debit card payments — which, if current trends continue, will soon account for twice as many PIN-debit transactions. Another rationale for the fees is to cover the losses from consumers who cannot make their card payments. Customers and retailers should not help cover the losses to overextended consumers who succumb to the aggressive marketing and default on their card payments. The banks or card companies decide whether to accept a card application. Retailers and consumers should not subsidize issuing a card to bad credit risks. Most outrageous is a recent marketing campaign targeting consumers who had just filed for bankruptcy. On a pure cost basis, it is difficult to justify any fee for a PIN-secured transaction. The funds are guaranteed to be there and are withdrawn instantly. The transmission costs are negligible since the transactions are routed through preexisting networks, in most cases those used for ATM withdrawals. Interchange fees also cover the so-called interest-free period — up to a month for credit cards and within two days for signature debit transactions. The interest-free periods are negligible for signature cards and nonexistent for PIN-debit ones. With credit cards, financial interests earn significant interest from consumers who choose to make monthly payments rather than clear their account balance. Nearly half of all consumers (44 percent) do not pay off their card balances each month, generating billions of interest income for banks and card companies.11 Once again, consumers and retailers should not supplement this ample source of income with interchange fees. Most telling is the fact U.S. consumers and retailers pay the highest credit card interchange fees in the world with rates averaging more than 1.70 percent, according to TransAction Resources, an international expert in the field. Retailers and consumers should not subsidize issuing a card to bad credit risks. Most outrageous is a recent marketing campaign targeting consumers who had just filed for bankruptcy. Most telling is the fact U.S. consumers and retailers pay the highest credit card interchange fees in the world International Solutions to Excessive Interchange Fees Other countries and the European Union are taking action to reduce credit with rates averaging more than 1.70 percent and debit card fees to levels approaching measurable costs. Australia Australia has pursued the issue most vigorously after investigations found significant disconnects between the retailer-paid fees and costs to banks Federal Reserve System, The Profitability of Credit Card Operations of Depository Institutions, June 2004, p. 4. 11 March 2005 survey of 800 households by Cambridge Consumer Credit. This figure includes 11 percent of households that made no monthly payments at all. 10 Food Marketing Institute 5 Hidden Credit Card Fees and card companies. In 2000, the Reserve Bank of Australia and Australian Competition and Consumer Commission issued a report concluding, among other things, that: Competitive pressures in card payment networks in Australia have not been sufficiently strong to bring interchange fees into line with costs. The end-users of these services — cardholders and merchants — have no direct influence over the setting of interchange fees but must rely on their financial institutions to represent their interests. Large financial institutions have the dominant influence on interchange fee setting; however, since they are both issuers and acquirers and benefit from the revenues generated, they have little incentive to press for lower interchange fees.12 Competitive pressures in card payment networks in Australia have not been sufficiently strong to bring interchange fees into line with costs. — Reserve Bank of The study found little justification for credit card interchange fees Australia averaging 0.95 percent, and questioned whether any fee at all should be assessed on the nation’s equivalent of online debit transactions (called electronic fund transfer point-of-sale or EFTPOS payments). The nation’s central bank responded in 2001 by establishing the Payments System Board to regulate card fees and processing. Using this authority, the Board: Reduced interchange fees on credit card transactions to an average of 0.50 percent in 2003. Allowed retailers the same year to add surcharges to sales based on the fee amount — both to show consumers the cost and give them the option to use a less expensive form of payment. Announced plans in February 2005 to force banks to cut the average EFTPOS interchange fee from 20 cents to five cents and the average Visa debit interchange fee from 40 cents to 15 cents.13 The reduction in credit card fees has generated more than $300 million (U.S.) in savings per year.14 If these fees were reduced to 0.50 percent in the U.S., consumers and retailers could save $10 billion a year, according to TransAction Resources.15 European Union In 1997, EuroCommerce, on behalf of retailers across Europe, filed a complaint with the Commission of the European Communities, which oversees competition. EuroCommerce charged that Visa’s interchange fee system is a “price-fixing cartel and therefore a hard-core infringement of competition law.”16 The retailers demanded that Visa’s operating rules on the fees be denied its exemption from the EU laws barring anti-competitive behavior. In short, EuroCommerce called for a ban on any cross-border interchange fee, termed a multilateral interchange fee (MIF) in Europe. In a series of rulings up to 1999, the Commission concluded that the Visa’s interchange fee system is a ‘price-fixing cartel and therefore a hardcore infringement of competition law.’ — EuroCommerce 12 Debit and Credit Card Schemes in Australia: A Study of Interchange Fees and Access, October 2000. 13 “Kickbacks at the Checkout,” The Age newspaper, March 1, 2005. 14 “An Interchange Tussle With a Twist: Retailers Against Zero Pricing,” Digital Transactions, September 10, 2004. 15 Morgan Stanley, owner of Discover Cards, estimates that the yearly savings would be $13 billion, Attacking the Death Star, April 15, 2004, p. 2. 16 Official Journal of the European Communities, November 22, 2002, p. L318/19. Food Marketing Institute 6 Hidden Credit Card Fees “MIF amounts to a restriction of competition ….”17 In a 2002 decision, the commission upheld the exemption conditionally, citing its 2000 finding that: ‘The fact that most banks were members of both Visa and the competing Eurocard/Mastercard system, and therefore were likely to issue whichever of the two brands of card had the higher interchange level and brought them the most revenue.’ Under the terms of the 2002 decision, Visa agreed to: — Commission of the Reduce cross-border interchange fees on credit card transactions to European Communities an average of 0.7 percent by 2007. [T]he Visa EU Board was free to set the MIF at any level it wished, independently of the costs of the specific services provided by issuing banks to the benefit of merchants. Furthermore, because the MIF was a business secret, those who in the end pay the MIF, that is the merchants, could not know its level and therefore could not effectively negotiate the merchant fee. The Commission found that there were upward pressures on the level of the previous MIF, in particular, the fact that most banks were members of both Visa and the competing Eurocard/Mastercard system, and therefore were likely to issue whichever of the two brands of card had the higher interchange level and brought them the most revenue.18 Reduce the same fees on cross-border debit card payments to an average of 0.28 euro ($0.37 U.S.) — a reduction of more than 50 percent, according to Visa.19 Make its MIFs known directly to retailers, including the breakdown showing the cost of processing, the interest-free period and the payment guarantee for cases of fraud. Both Visa and MasterCard are now required to post their cross-border MIFs on their Web site. Submit a cost study that is independently audited. In 2007, the commission will decide whether to adjust the fees based on this study. Although not entirely pleased by the ruling, EuroCommerce deemed it progress. It continues to assert that the MIF should not cover the interestfree period, payment guarantee and the processing costs incurred by the card-issuer’s bank. In 2003, the EU Commission launched a similar anticompetition investigation against MasterCard. The United Kingdom In 2000, an independent review of banking services commissioned by the UK Treasury leveled some of the harshest criticism against interchange fees. A finance and securities expert, Don Cruickshank, led the investigation that produced the provocative Review of Banking Services in the UK — known as the Cruickshank report. His review found anti-competitive issues throughout the UK banking system, especially in the area of interchange fees. Among the findings: [I]nterchange fees for credit cards and the Visa debit card scheme are substantially higher than can be justified by legitimate cost recovery. In all cases, the process by which these fees are set is extremely opaque to end users and susceptible to abuse…. 17 Ibid., p. L 318/28. The previous decisions were issued in 1987, 1989, 1995 and 1999. In 1995, the commission ruled that “… a [MIF] agreement is a restriction of competition … because it substantially restricts banks individually to decide their own pricing policies.” 18 The Commission of the European Communities, Decision of July 22, 2002, relating to the proceeding under Article 53 of the EC Treaty and Article 53 of the EEA Agreement (Case No COMP/29.373 – Visa International – Multilateral Interchange Fee). 19 Official Journal of the European Communities, November 22, 2002, p. L318/20. ‘In essence, the system subsidises relatively sophisticated consumers of financial services at the expense of poorer customers who either do not hold a credit card or who cannot obtain the best deals.’ — Review of Banking Services in the UK, 2000 Food Marketing Institute 7 Hidden Credit Card Fees [C]ompetition between payment mechanisms is distorted in favour of products with artificially high interchange fees. The current pattern of interchange payments creates a cross subsidy for credit card use, shared between credit card issuers and users. Users of many credit cards receive loyalty points or cash back for making transactions by credit card. This encourages greater use of the cards and perpetuates the advantage of existing schemes. In essence, the system subsidises relatively sophisticated consumers of financial services at the expense of poorer customers who either do not hold a credit card or who cannot obtain the best deals.20 The interchange fee on credit card payments in the UK averages 1.1 percent, according to the Cruickshank report, while the fee on debit card ones ranges from 3.8 to 9.2 pence ($0.07-$0.17 U.S.).21 It calculated that the direct cost of fraud equals less than one-tenth of the interchange fee.22 The report found the idea that the fee should cover the interest-free period “the least justifiable.” This is because it is “not a payment service supplied to retailers. Rather, it is a credit service supplied by credit card issuers to credit card holders.” The reported added, “customers who do not pay off their bills in full each month — notably those customers who have longterm debt on their credit cards — do not benefit from any interest-free period. However, card payments made by these customers still attract an interchange fee, so the card issuer involved is paid twice for the transaction — once by the retailer and once by the customer.”23 After reviewing all the issues associated with interchange fees, the Cruickshank report concluded, “There is an overwhelming case for decisive government intervention.…”24 The report brought out the regressive nature of interchange fees, noting how they discriminate against consumers who lack the knowledge or the buying volume to benefit from reward schemes. These consumers are typically among those who cannot pay off their card balances. They pay doubledigit interest rates. They incur substantial penalties for failing to pay. Or they pay by cash or check and otherwise subsidize the awards for well-off consumers by paying the higher prices needed to cover the interchange fees. The UK Office of Fair Trading (OFT) launched an investigation, focusing first on MasterCard. In 2003, the OFT reached a preliminary conclusion on the agreement among MasterCharge’s UK members covering credit and debit card charges on domestic transactions. In particular: [T]he OFT believes that the agreement leads to an unjustifiably high fee being paid to card issuing banks on every transaction made by a MasterCard credit or charge card in the UK. The cost of these fees is borne initially by retailers’ banks, but is passed on to retailers and, in turn, to consumers through higher retail prices. In effect, these fees act like a tax on retail transactions that is paid by all consumers in shops that accept credit cards. This results in higher retail prices for UK consumers.25 Review of Banking Services in the UK, HM Treasury, March 20, 2000, p. 81. Ibid., p. 259. 22 Ibid., p. 260. 23 Ibid., pp. 264-265. 24 Ibid., p. xv. 25 Office of Fair Trading, MasterCard Interchange Fees: Preliminary Conclusions, Summary, February 2003. 21 20 ‘There is an overwhelming case for decisive government intervention.’ — Review of Banking Services in the UK, 2000 ‘In effect, these fees act like a tax on retail transactions that is paid by all consumers in shops that accept credit cards.’ — UK Office of Fair Trading, 2003 Food Marketing Institute 8 Hidden Credit Card Fees It rejected the notion that the MIF should cover the interest-free period, stating this provision “is not part of the payment system provided to retailers…. In fact many cardholders do not receive this benefit: the large proportion of cardholders who do not clear their balances each month generally do not receive any interest-free credit.”26 The OFT also rejected that the fee should cover the payment guarantee against the costs of fraudulent use of credit cards, saying “it is not clear why this service has to be bundled together with other payment systems services. Retailers could be given a choice as to whether they purchase this guarantee from the scheme, purchase it from other potential providers, such as insurers, or self-insure against the risk. The bundling together of these services would appear to be an unnecessary restriction of competition.”27 The OFT reaffirmed this finding in 2004 under prohibitions against anti-competitive agreements in the European Treaty and Competition Act and the “Modernisation Regulation,” which took effect on May 1.28 The OFT added that it “has reasonable grounds for suspecting that the agreement between Visa members on multilateral interchange fees appreciably prevents, restricts and/or distorts competition….”29 The Office is now investigating Visa’s interchange fees. The MIF has been challenged by competition authorities in other European countries, including Italy, The Netherlands, Poland, Portugal, Spain and Switzerland, according to EuroCommerce. ‘The agreement between Visa members on multilateral interchange fees appreciably prevents, restricts and/or distorts competition.’ — UK Office of Fair Trading, 2004 Conclusion The movement toward a plastic marketplace presents opAs with the shift from a cash- to a portunities to reduce costs and fraud and to offer consumlargely check-based economy years ers ample convenient payment options. As with the shift ago, preserving the public trust in the from a cash- to a largely check-based economy years ago, new electronic payments system is preserving the public trust in the new electronic payments paramount. Exploiting change of this system is paramount. Exploiting change of this magnitude magnitude for financial gain for financial gain undermines that trust. When this occurs, undermines that trust. When this public institutions must intervene. occurs, public institutions must From Australia to the U.S. to Europe, the current inintervene. terchange fee system is not based on easily measurable costs. Proponents of the system argue that costs are less important than having a fee structure that maximizes card use. This argument may have applied years ago when card use was in its infancy. But now that plastic has become the predominant currency of commerce, there is no need to stimulate more use of plastic. In addition, by driving up the costs of goods and services, the current fee system abuses low-income consumers who depend on every dollar to survive. And it is ill-suited for a world economy in which billions of transactions are made monthly as trillions of dollars, yen and euro change hands. 26 27 Ibid., p. 8. Ibid., p. 8. 28 OFT notice 184/04 issued on November 10, 2004. 29 Ibid. Food Marketing Institute 9