Merchants Say Reintroduced Credit Card Competition Act Would Save Businesses and Consumers Billions

Contact: J. Craig Shearman
(202) 257-3678

WASHINGTON, June 7, 2023 – The Merchants Payments Coalition welcomed today’s reintroduction of the Credit Card Competition Act, saying the measure would provide relief from billions of dollars in rapidly rising “swipe” fees that drive up prices for consumers. The measure is being sponsored by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, and by Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.

“Small businesses are calling out the loudest for swipe fee reform because we are hit the hardest by these fees,” said Mike Beal, chief financial officer of Kansas City, Kan., family-owned grocer Balls Foods, who will speak at a Capitol Hill news conference today. “Small businesses pay the highest swipe fee rates, we don’t have the resources to navigate complex credit card contracts, and we have absolutely no leverage to negotiate as these fees rise higher every year. Small businesses need swipe fee reform, and we need it now.”

“Lawmakers laid the groundwork last year and we look forward to them passing this bipartisan, pro-Main Street legislation this year,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Swipe fees that drive up costs for small merchants and prices for American families are already the highest in the industrialized world and are going nowhere but up. Lack of competition is the problem, and the sooner the card industry can be made to compete the better. As policymakers work to reduce inflation, this carefully crafted bill will lead to lower fees and better security while helping merchants hold down prices.”

Durbin and Marshall first unveiled the measure last July and an identical companion bill was introduced in the House in September by Gooden and Welch before Welch was elected to the Senate. The 2021-2022 session of Congress ended before the bills could see a vote, but action is expected in the current session.

The Credit Card Competition Act would address “swipe” fees averaging over 2 percent of the transaction that banks and card networks like Visa and Mastercard charge merchants to process credit card transactions. Credit and debit card swipe fees have doubled over the past decade, soaring by $22 billion in 2022 alone to a record $160.7 billion, and are most merchants’ highest operating cost after labor, driving up consumer prices by an estimated $1,024 a year for the average family. As a percentage of the transaction, credit card swipe fees automatically go up as prices rise, creating a multiplier effect on inflation.

The measure seeks to lower swipe fees by ending Visa and Mastercard’s monopoly over how transactions on credit cards banks issue under their brands are routed for processing. Under current practice, Visa and Mastercard centrally price-fix the fees and restrict routing of the transactions to their own networks. But the bill would require that cards from banks with $100 billion or more in assets be enabled to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star or Shazam, or even American Express or Discover.

Banks would decide which networks to enable, but merchants would then choose which to use on individual transactions, meaning networks would have to compete over fees, security and service, saving merchants and their customers an estimated $11 billion a year. Consumers would still use the same Visa and Mastercard cards they now use, rewards would not be affected, and community banks and small credit unions would be exempt.

In addition to lowering fees, the bill would improve security. Independent networks have less fraud than Visa and Mastercard’s networks, according to the Federal Reserve, and the bill would bar networks controlled by foreign governments like China’s UnionPay from American credit cards. Any bank could put China UnionPay on its credit cards right now with no legal restrictions, but the bill would close that loophole.

About MPC
The Merchants Payments Coalition 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. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.