The Senate Judiciary Committee met on Tuesday for a hearing on the allegations visa–MasterCard The “duopoly” that committee members on either side say has left retailers and other small businesses without the flexibility to barter interchange fees on bank card transactions.
“This is a strange group. The most conservative and liberal members happen to agree that we need to do something about this situation,” said Dick Durbin, committee chairman and Democratic senator from Illinois.
Interchange fees, also generally known as swipe fees, are percentage fees that merchants pay to bank card issuers when customers use bank cards to make retail purchases. visa And MasterCard have a combined market cap of greater than $1 trillion and control 80% of the market.
“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, primarily in the form of interchange fees,” Durbin told the committee.
Durbin, together with Kansas Republican Sen. Roger Marshall, co-sponsored the bipartisan Credit Card Competition Act, which goals to eliminate market dominance by Visa and Mastercard by requiring banks with greater than $100 billion in assets to have no less than one other payment network to supply their cards, except Visa and Mastercard.
“In this way, small businesses would finally have a real choice: They could route credit card transactions over the Visa or Mastercard network and continue to pay interchange fees, which are often considered the second or largest cost, or they could choose a lower-cost alternative,” Durbin said the committee.
However, Visa and Mastercard are sticking with their swipe fees.
“We think of them as incentives, some might think of them as punishments. But if you can introduce new technologies that reduce risk, remove fraud from the system and streamline processing, then you would be entitled to lower interchange fees,” said Bill Sheedy. Senior advisor to Visa CEO Ryan McInerney. “It is very expensive to issue a product and offer a payment guarantee and online customer service without any liability. All of these things and more, Senator, will be taken into account in the exchange.” [fees].”
The executives also warned about the Credit Card Competition Act, with Sheedy claiming that it would “take control away from consumers over their very own payment decisions, reduce competition, impose technology sharing regulations, 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, president of Mastercard Americas, alluding to the 2010 Durbin Amendment to the Dodd-Frank Act, which required the Fed to cap fees on retailers for transactions on debit cards. “Since the introduction of debit regulation, debit rewards have been eliminated, fees have increased, access to capital has been restricted, and competition has been stifled.”
But current high credit card fees for retailers are leading to higher prices for consumers National Retail Association he told the committee in a letter before the hearing. The Credit Card Competition Act, wrote the retail industry's largest trade association, will bring “fairness and transparency to the payments system and relief for American businesses and consumers.”
“When we think of consumer spending, credit card fees aren't the first thing that comes to mind, but these fees account for a surprisingly large portion of consumer spending,” said Roger Alford, a law professor at Notre Dame University. “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 that would reduce their swipe fees by four basis points for three years. But a federal judge rejected the settlement in June, saying they could afford to pay more.
Visa is also fighting against a Justice Department suit submitted in September. The payments network is accused of maintaining an illegal monopoly over debit card payment networks, which has affected “the price of almost everything,” in response to Attorney General Merrick Garland.
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