The Senate Judiciary Committee met on Tuesday for a hearing on the alleged charge Visa–MasterCard A “duopoly,” which panelists on both sides of the aisle say has left retailers and other small businesses without the ability to negotiate interchange fees on credit card transactions.
“This is a strange grouping,” said committee chairman and Democratic Senator from Illinois Dick Durbin. “The more conservative members and the more liberal members agreed that we have to do something about this situation.”
Interchange fees, also known as swipe fees, are paid from the merchant's bank account to the cardholder's bank, when a customer uses a credit card for a retail purchase. Visa and MasterCard They have a combined market capitalization of over $1 trillion, controlling 80% of the market.
“In 2023 alone, Visa and MasterCard charged merchants more than $100 billion in credit card fees, most of it in the form of interchange fees,” Durbin told the committee.
Durbin, along with Kansas Republican Senator Roger Marshall, co-sponsored the bipartisan Credit Card Competition Act, which aims to dominate the market with Visa and MasterCard by requiring banks with more than $100 billion in assets to offer another payment network. At least one is online. Their cards, along with Visa and MasterCard.
“In this way, small businesses will finally have a real choice: They can route credit card transactions on the Visa or Mastercard network and continue to pay the interchange fees that often rank as their second or largest expense, or they can choose a less expensive alternative,” Durbin told the committee.
However, Visa and Mastercard stick to their own swipe fees.
“We view them as incentives, and some people might view them as penalties,” Bill Sheedy said. “But if you can adopt new technology that reduces risk, removes fraud from the system, and improves streamlined processing, you will qualify for lower exchange rates.” Senior Advisor to Visa CEO Ryan McInerney. “It's too expensive to release a product and offer a payment guarantee and online customer service, and not take any responsibility. All of these things, and many more, Senator, are factored into the interchange (fees).”
Executives also warned of the Credit Card Competition Act, which Sheedy claimed would “remove consumer control over their payment decisions, reduce competition, impose technology-sharing mandates and pick winners and losers by favoring certain competitors over others.”
“Why do we know this? Because we've seen it before,” said Linda Kirkpatrick, MasterCard's president of the Americas, referring to Durbin's amendment to the 2010 Dodd-Frank Act, which requires the Federal Reserve to limit fees charged to retailers for card-using transactions. opponent. “Since debit regulation was imposed, debit rewards have been eliminated, fees have risen, access to capital has diminished, and competition has been stifled.”
But current high credit card fees for retailers translate into higher prices for consumers, the National Retail Federation told the committee in a letter before the hearing. The retail industry's largest trade association wrote that the Credit Card Competition Act would provide “fairness and transparency to the payment system and provide relief to American businesses and consumers.”
“When we think about consumer spending, credit card swipe fees are not the first thing that comes to mind, but these fees represent a surprisingly large portion of consumer spending,” said Roger Alford, a law professor at the University of Notre Dame. “Last year, the average American spent $1,100 on swipe fees, more than they spent on pets, coffee or alcohol.”
Visa and Mastercard agreed to a $30 billion settlement in March aimed at cutting swipe fees by four basis points for three years, but a federal judge rejected the settlement in June, saying they could pay more.
Visa is also facing a lawsuit filed by the Department of Justice in September. The payment network is accused of maintaining an illegal monopoly over debit card payment networks, which affected “the price of almost everything,” according to Attorney General Merrick Garland.
