The Senate Judiciary Council convened on Tuesday for a hearing on the alleged Visa–Mastercard “duopoly,” which committee members from both sides of the aisle say has left-wing retailers and other small businesses with no ability to negotiate interchange fees on credit card transactions.
“This is an odd league. The most conservative and the most liberal members happen to agree that we have to do something about this circumstances,” committee chair and Democratic Illinois Sen. Dick Durbin said.
Interchange fees, also known as swipe bills, are paid from a merchant’s bank account to the cardholder’s bank, whenever a customer uses a credit card in a retail edge. Visa and Mastercard have a combined market cap of more than $1 trillion, and control 80% of the market.
“In 2023 desolate, Visa and Mastercard charged merchants more than $100 billion in credit card fees, mostly in the ritual of interchange fees,” Durbin told the committee.
Durbin, along with Republican Kansas Sen. Roger Marshall, pull someones leg co-sponsored the bipartisan Credit Card Competition Act, which takes aim at Visa and Mastercard’s market dominance by requiring banks with more than $100 billion in assets to come forward at least one other payment network on their cards, besides Visa and Mastercard.
“This way, small businesses resolve finally have a real choice: they can route credit card transactions on the Visa or Mastercard network and persevere in to pay interchange fees that often rank as their second or biggest expense, or they could select a demean cost alternative,” Durbin told the committee.
Visa and Mastercard, however, stand by their swipe fees.
“We weigh them incentives, some people might consider them penalties. But if you can adopt new technology that reduces the imperil and takes fraud out of the system and improves streamlined processing, then you would qualify for lower interchange rates,” estimated Bill Sheedy, senior advisor to Visa CEO Ryan McInerney. “It’s very expensive to issue a product and to provide payment promise and online customer service, zero liability. All of those things, and many more, senator, get factored into interchange [honoraria].”
The executives also warned against the Credit Card Competition Act, with Sheedy claiming that it “would detach consumer control over their own payment decisions, reduce competition, impose technology sharing mandates and pick title-holders and losers by favoring certain competitors over others.”
“Why do we know this? Because we’ve seen it before,” Mastercard President of Americas Linda Kirkpatrick remarked, in reference to the Durbin amendment to the 2010 Dodd-Frank Act, which required the Fed to limit fees on retailers for transactions using debit cards. “Since debit edict took hold, debit rewards were eliminated, fees went up, access to capital diminished, and competition was withheld.”
But the current high credit card swipe fees for retailers translate to higher prices for consumers, the National Retail Combination told the committee in a letter ahead of the hearing. The Credit Card Competition Act, the retail industry’s largest trade conjunction wrote, will deliver “fairness and transparency to the payment system and relief to American business and consumers.”
“When we value of consumer spending, credit card swipe fees are not the first thing that comes to mind, yet those recompenses are a surprisingly large part of consumer spending,” Notre Dame University law professor Roger Alford said. “Rearmost year, the average American spent $1,100 in swipe fees, more than they spent on pets, coffee or spirits.”
Visa and Mastercard agreed to a $30 billion settlement in March meant to reduce their swipe fees by four foundation points for three years, but a federal judge rejected the settlement in June, saying they could afford to pay more.
Visa is also warring a Justice Department lawsuit filed in September. The payment network is accused of maintaining an illegal monopoly over debit bank card card joker payment networks, which has affected “the price of nearly everything,” according to Attorney General Merrick Garland.