ICYMI: “Credit Card Companies Urged by Senators to Cancel Plan to Raise Swipe Fees”
WASHINGTON – In case you missed it, Bloomberg highlighted calls from U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, and U.S. Senator Roger Marshall (R-KS) for Visa and Mastercard to withdraw their reported plans to raise credit card fees.
Durbin and Marshall are lead sponsors of the Credit Card Competition Act, which would enhance competition and choice in the credit card network market which is currently dominated by the Visa-Mastercard duopoly. Building off of debit card competition reforms enacted by Congress in 2010, the bill would direct the Federal Reserve to ensure that largest credit card-issuing banks offer a choice of at least two networks 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 a total of $93 billion in U.S. merchant credit card fees in 2022. These fees include interchange or swipe 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 these fees in the price of the goods and services they buy.
Last year, Durbin and Marshall, along with then-U.S. Representative Peter Welch (D-VT) and U.S. Representative Beth Van Duyne (R-TX) sent a bipartisan, bicameral letter to the CEOs of Visa and Mastercard urging the companies not to proceed with plans to raise their interchange fee rates.
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Bloomberg: Credit Card Companies Urged by Senators to Cancel Plan to Raise Swipe Fees
Steven T. Dennis, 8/30/23
Senators are urging credit card giants Visa Inc. and Mastercard Inc. to cancel plans to raise their swipe fees charged to retailers and used reports on the plans to champion their bill to force competition in the industry.
Dick Durbin, the No. 2 Senate Democrat, and Roger Marshall, a Kansas Republican, the lead sponsors of the Credit Card Competition Act, said Wednesday that the companies were already raking in fees that contribute to inflation.
“With small businesses and families already dealing with high prices on groceries and gasoline, this hidden credit card fee increase couldn’t come at a worse time,” the senators said in a statement.
Their measure would require the largest banks to offer a choice of networks for processing transactions, including one outside of Visa or Mastercard. Durbin successfully helped enact legislation in 2010 that led to much lower fees for debit card transactions.
The swipe fee battle has already resulted in fierce lobbying, given the legislation’s potential to crimp revenue for the payment giants and for banks, while benefitting retailers, though it’s not clear if the issue will advance in this Congress.
The Nilson Report, an industry publication, found that merchants paid out $160.7 billion in swipe fees last year, while the merchant-consulting company CMSPI estimated the new fees could cost them another $500 million a year.
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