March 31, 2022
WASHINGTON, March 31, 2022 – The Merchants Payments Coalition today asked the House Financial Services Committee to go beyond overdraft fees as it looks into bank fees “costing consumers billions,” saying credit and debit card swipe fees should be considered as well.
“MPC applauds the committee’s action, but we believe a full examination of ‘fees costing consumers billions’ should also include the billions of dollars big banks and card companies charge to process credit and debit card transactions, MPC said. “The banking industry collects seven times as much in swipe fees as it does in overdraft fees and the impact on American families is far more widespread. Swipe fees are a hidden tax paid every day by almost all American consumers, not just those who overdraw their accounts.”
MPC asked the committee to investigate “the broken and uncompetitive market in which swipe fees are set,” noting that Visa and Mastercard centrally price-fix the swipe fees charged by banks that issue their cards. The banks then all charge the same fees rather than competing to give merchants and consumers the best deal.
“Any fee that costs everyday Americans billions while offering little in return should be the object of utmost scrutiny by those with oversight over the banking industry,” MPC said.
MPC’s comments came in a letter to the committee as its Subcommittee on Financial Institutions holds a hearing on “The End of Overdraft Fees? Examining the Movement to Eliminate the Fees Costing Consumers Billions” this morning.
Merchants paid $110.3 billion in credit and debit card swipe fees in 2020, according to the Nilson Report. By comparison, overdraft fees totaled $15.5 billion in 2019, according to the Consumer Financial Protection Bureau. At an average of just over 2 percent of the transaction amount, U.S. credit card swipe fees are the highest in the industrialized world. Swipe fees are most merchants’ highest operating cost after labor and drive up consumer prices, amounting to more than $700 a year for the average American family.
Swipe fees have risen 70 percent over the past decade and will go up again in April, when Visa and Mastercard are scheduled to complete implementation of $1.2 billion in increases.
With inflation at its highest level in 40 years, “these fees only compound the pain felt by consumers,” MPC said in its letter. Because the fees are a percentage of the transaction, the amount collected goes up as prices go up with inflation even when rates stay the same, “creating a multiplier effect that ultimately comes out of the pocket of consumers and results in a windfall for Visa, Mastercard and the largest banks.”
The represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.