Durbin Delivers Opening Statement During Senate Judiciary Committee Hearing On Enhancing Competition In The Credit Card Market, Lowering Fees
Witnesses include senior leaders at Visa, Mastercard
WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, today delivered an opening statement in the Senate Judiciary Committee hearing entitled “Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System.” The hearing will examine the lack of competition in the credit card market and its impact on interchange fees, as well as legislative solutions like Chair Durbin’s Credit Card Competition Act to help protect consumers.
Key Quotes:
“Over the past several years, the American people suffered through a period of high inflation brought on by the COVID pandemic, which temporarily closed manufacturing plants and clogged supply chains. But there is a hidden contributor to the high prices we all pay on everything from furniture to eggs: credit card swipe fees.”
“Every time a consumer makes a purchase using a credit card, a swipe fee is taken out of the transaction amount and divided between the credit card network and the bank that issued the card. The biggest part of the swipe fee is something called the interchange fee, which is set by the credit card network and paid to the issuing bank. The credit card market is dominated by Visa and Mastercard, which controls 83 percent of the credit cards in this country. These networks can set interchange fees at seemingly whatever amount they want.”
“Retailers, restaurants, and other small businesses have no ability to negotiate these fees, which can run anywhere from one to three percent of the total bill. The only ‘choice’ they have is to accept Visa- and Mastercard-branded credit cards and pay the fee or refuse to accept the cards entirely—which, in this day and age, is no choice at all for most retailers.”
“I first learned about interchange fees during a Senate Judiciary Committee hearing held in 2006. In the 18 years since that hearing, American consumers have been charged a staggering $1.1 trillion in interchange fees. The vast majority of these fees—a total of $797 billion—come from credit card purchases. The remaining $320 billion—less than one-third of the total—comes from debit cards. There’s a pretty simple explanation for this disparity.”
“In 2010, the Senate voted to include what became known as the Durbin Amendment in the Dodd-Frank Act. The Durbin Amendment capped the interchange fees that card networks like Visa and Mastercard could set on behalf of large debit card-issuing banks. This single reform is estimated to have saved consumers $6 billion in the first year after its implementation, and billions more since.”
“Free of similar regulation in the credit card market, the Visa-Mastercard duopoly virtually prints money on behalf of their Big Bank partners. In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, mostly in the form of interchange fees.”
“But help is on the way. In July of 2022, I joined my colleague Senator Roger Marshall to introduce the bipartisan Credit Card Competition Act. The Credit Card Competition Act would break the Visa-Mastercard stranglehold on the market by requiring only the largest banks—those with more than $100 billion in assets—to enable two networks on their cards, and one must be a company other than Visa or Mastercard. In this way, small businesses would finally have a real choice.”
“They could route credit card transactions on the Visa or Mastercard networks and continue to pay interchange fees that often rank as their second or third biggest expense. Or they could select a lower-cost alternative. I have a pretty good idea which one they’ll chose. With downward pressure on these exorbitant interchange fees, more money will flow to the local restaurants, bookstores, and shops that we all frequent.”
“Where the big banks use interchange fees to pad profit margins of 30 percent or more, small businesses, with tight profit margins often as low as three to five percent, will use these savings to hire more workers, invest in their businesses or—heaven forbid—actually lower prices. No matter their choice, we all benefit.”
Video of Durbin’s opening statement is available here.
Audio of Durbin’s opening statement is available here.
Footage of Durbin’s opening statement is available here for TV Stations.
In Congress, Durbin has made it a priority to protect consumers. Durbin’s Credit Card Competition Act is bipartisan legislation that would enhance competition and choice in the credit card network market, which is currently dominated by the Visa-Mastercard duopoly. It is estimated that businesses paid more than $100 billion in swipe fees on Visa- and Mastercard-branded cards in 2023 alone.
Building off of debit card competition reforms enacted by Congress in 2010, the Credit Card Competition Act would direct the Federal Reserve to ensure that the largest credit card-issuing banks offer a choice of at least two networks, one of which must be a network other than Visa and Mastercard, over which an electronic credit transaction may be processed.
Visa and Mastercard wield enormous market power in credit cards; according to the Federal Reserve, they account for nearly 576 million cards, or about 83 percent of general-purpose credit cards. Visa’s and Mastercard’s market power and network structure have enabled them to impose fees on U.S. merchants that are among the world’s highest, charging more than $100 billion in U.S. merchant credit card fees in 2023. These fees include interchange fees which Visa and Mastercard require merchants to pay to issuing banks, as well as network fees that Visa and Mastercard require merchants to pay directly to them. Consumers ultimately pay for all of these fees in the price of the goods and services they buy.
While public support grows for Durbin’s push to protect consumers, credit card and airline companies and Wall Street banks continue to try to coordinate a smear campaign against the popular efforts.
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