SENATE BILL REPORT
SB 5885
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
As of February 7, 2007
Title: An act relating to protecting consumers by prohibiting interchange fees from being charged on the state sales tax portion of a retail sale transaction.
Brief Description: Protecting consumers by prohibiting financial institutions from charging interchange fees on the state sales tax portion of a retail sale transaction.
Sponsors: Senators Jacobsen and Weinstein.
Brief History:
Committee Activity: Financial Institutions & Insurance:
SENATE COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE
Staff: Vanessa Firnhaber-Baker (786-7471)
Background: When a consumer uses a debit or credit card to pay for goods or services, the
retailer relays a payment request to its bank. The retailer's bank then forwards that request to the
bank that issued the card to the consumer. The issuing bank then pays the retailer's bank and the
retailer's bank pays the retailer. Both the issuing bank and the retailer's bank keep some portion
of the payment. The portion those banks keep are typically called "interchange fees." Financial
institutions charge interchange fees based on the total amount of the transaction, including sales
tax.
The banks use associations (most commonly Visa and MasterCard) to convey the transaction
information regarding the cards. For this service, the associations also retain some portion of the
consumer's payment for each transaction.
Therefore, the end payment that the retailer receives for the credit card payment is less than the
actual amount that the consumer was charged. There are no current regulations, either federal or
state, addressing interchange fees.
Summary of Bill: Interchange fees are defined as the fee a merchant's financial institution pays
to a cardholder's financial institution when cardholder uses a credit card or a debit card as
payment during a retail transaction.
Financial institutions may not charge interchange fees on the portion of a retail transaction that
is paid as state sales tax.
Appropriation: None.
Fiscal Note: Not requested.
Committee/Commission/Task Force Created: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.