WASHINGTON (Legal Newsline)-U.S. credit card companies are raking in big bucks from charging interchange fees while consumers and businesses continue to struggle amid a weakened national economy, a government report said Thursday.

Although credit card companies incur costs for offering cards, the report from the investigative arm of Congress, the Government Accountability Office, said "concerns remain about the extent to which interchange fee levels closely relate to the level of card program expenses or whether they are set high so as to increase issuer profits."

Interchange fees are charges that credit card companies collect from businesses and consumers in the course of transactions. The fees typically include a flat transaction charge plus a percentage of each purchase.

"Despite the benefits of payment card acceptance, representatives of several of the large merchants we interviewed reported that their costs of card acceptance have increased disproportionately in comparison with benefits, in large part because of increasing card use," the GAO report said.

Last year, American merchants paid an average interchange rate of 1.82 percent per transaction, according to the Nilson Report, a Carpinteria, Calif.-based newsletter that tracks the industry.

"Today's GAO report verifies what retailers -- small and large -- have been saying for years," said John Emling, senior vice president for government affairs at the Retail Industry Leaders Association.

"Congress must act to reform this broken system and prevent credit card giants and their issuing banks from continuing to impose unjustifiable fees on retailers and their customers," Emling said in a statement.

The Arlington, Va.-based retailers' group said that last year Visa and MasterCard represented 71 percent of the credit card market and 88 percent of all interchange fees were collected by the top ten managing banks.

The GAO report notes that there would be advantages to capping interchange fees, which are not regulated by the federal government.

"A significant advantage of capping or limiting interchange fees would be that it would reduce interchange fee costs most directly," the report said. "The experience in Australia indicates that this option does lower merchant costs and Australian regulators and merchant representatives insist that consumers have also benefited, arguing that merchants in competitive markets generally lower prices."

The GAO report also may bolster calls by California Assemblyman Pedro Nava, chairman of the Assembly Banking and Finance Committee, who wants to probe interchange fees.

Nava is seeking the state's Democratic nomination for attorney general next year.

"With the price of gas at more than $3 a gallon, credit card companies and their banks who sponsor gasoline credit cards are collecting as much as 8 cents per gallon for interchange fees," Nava said in a recent statement. "We need to examine our options to lower these fees and pass the savings on to California's struggling consumers."

There are two efforts on Capitol Hill aimed at addressing interchange fees.

U.S. Reps. Peter Welch, D-Vt., and Bill Shuster, R-Pa., have introduced HR 2382, the Credit Card Interchange Fees Act of 2009.

On the Senate side, Richard Durbin, D-Ill., and Christopher Bond, R-Mo., have introduced amendments to HR 627, the Credit Cardholders' Bill of Rights Act of 2009, that allow for consumer discounts for debit cards and less expensive credit cards, and for greater transparency concerning hidden interchange fees.

In May, U.S. President Barack Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009, which directed the Government Accountability Office to conduct a study of credit card interchange fees.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.