Growing credit card swipe fees are driving up costs for retailers and prices for consumers but could be reined in by passage of the Credit Card Competition Act, the National Retail Federation recently told the Senate Judiciary Committee.
“Arbitrarily high swipe fees are adding inflationary pressure to the U.S. economy and prevent retailers and other merchants from growing their businesses,” NRF Senior Vice President for Government Relations David French said. “The Credit Card Competition Act provides a bipartisan, common-sense solution that would finally bring competition to the credit card routing market” while delivering “fairness and transparency to the payments system and relief to American businesses and consumers,” he said.
French’s comments came in a letter sent to the committee ahead of a hearing this morning on “Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System.” The hearing is being held by committee Chairman Richard Durbin, D-Ill., who is one of the lead sponsors of the bipartisan CCCA along with Senator Roger Marshall, R-Kan.
French said Visa and Mastercard, which control over 80% of the U.S. credit card market, each centrally set swipe fee rates charged by all banks that issue their cards, forcing “every U.S. business that accepts credit cards to pay excessively high payments fees” that are imposed on a “take-it-or-leave-it” basis. At a record $172 billion last year, swipe fees are one of retailers’ highest operating expenses and drive up consumer prices by over $1,100 a year for the average family, he said.
“The current credit card system has been designed by the Visa-Mastercard duopoly to maximize profits for the networks and the nation’s largest credit card issuers while forcing merchants and their customers to pay excessive fees without any recourse to help bring these costs under control,” French said. “This market failure requires action by Congress.”
The CCCA would address the issue by requiring that credit cards issued by the nation’s largest banks be able to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competing network like American Express or Discover or debit networks like Star, NYCE or Shazam. Merchants would then choose which network to use, prompting competition over fees, security and service. Competition over transaction processing is expected to save retailers and their customers an estimated $16.4 billion a year.
The measure would apply only to banks with at least $100 billion in assets and would have no effect on local community banks or small credit unions. Credit card rewards would not be affected because those are determined by banks that issue cards, not the networks that process transactions.
As the leading authority and voice for the retail industry, NRF has led retailers’ fight for fair swipe fees for more than 20 years, winning passage of legislation that capped debit card swipe fees and a key court settlement that gave retailers the right to accept either credit cards or debit cards without having to take both.
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Tags: Accounting, Small Business
