More congressional hearings this week on all things card industry, with a primary focus on interchange. I’m wary of a Congress that decides to place pricing controls where [I think] the market should be determining pricing (e.g. interchange…), but I’m also wary of the credit card industry’s inability to separate the business model of interchange from questionable business policies.

The whole lobbying effort and rhetoric surrounding merchant positioning re: interchange is all about “what’s good for consumers.” Whether or not you believe that interchange reductions will result in consumer price reductions (I don’t…and our data indicates that the vast majority of consumers don’t either), in this case, the merchant lobby has turned perception into reality. The business model of interchange is under fire because Congress is convinced it is a consumer issue.

But how much of this perception is due to the overall negative feelings directed at the card industry? When listening to members of congress talk about interchange, they always seem to throw something in about interest rates, gouging consumers, or some other piece of information that really has nothing to do with interchange.

Perception is reality.

Case in point: my brother had a blatantly fraudulent charge on his account, which was actually recurring each month. He spent 45 minutes on the phone with his issuer (who shall remain nameless…but look at the blog entry title…) stating his case.

The ensuing conversation:
CSR: “We have a special relationship with that merchant and I can’t take that charge off your account”
Bruce’s brother: “But this is a fraudulent charge.”
CSR: “I’m sorry I am unable to do anything about this.”
Bruce’s brother: “Then I would like to close the account.”
CSR: “I’m sorry sir, but I am unable to close an account unless it is inactive for 30 days.”
Bruce’s brother: “But this merchant is hitting my account every 30 days. It is inactive otherwise.”
CSR: “I’m sorry sir I am unable to take the charge off your account, and am unable to close the account.”

And so on, and so on…

Does this sound like a “consumer friendly” industry? Regardless of whether this was an isolated experience with one issuer (I can assure you it wasn’t…), is it any wonder that interchange as a business model gets lumped in with the experiences that cardholders go though such as the one above? Maybe our Representatives and Senators have had similar experiences as plain old cardholders?

Things to think about when we look at this more holistically. Separating the business model and the somewhat nefarious practices should be a priority if the business model itself is to survive.