As Congress heads into its lame duck session, more than 1,800 merchants from across the country called on lawmakers to pass legislation that would bring long-sought competition to credit card swipe fees that drive up costs for consumers.
Support is Building
“Support for swipe fee competition is quickly building, and this letter from a broad cross section of merchants is proof,” said Doug Kantor, NACS general counsel and Merchants Payments Coalition executive committee member. “Signers range from gas stations and grocery stores to Main Street retailers and local restaurants. Swipe fees impact every segment of the merchant community and every consumer whether they pay by credit card or not. Wall Street banks and global card networks that dominate the industry by unfairly blocking competition have profited on the backs of small businesses and American families for far too long.”
In a letter sent by the Merchants Payments Coalition (MPC) to all members of the House and Senate, merchants asked lawmakers to support the Credit Card Competition Act sponsored by Senators Richard Durbin, D-Ill., and Roger Marshall, R-Kan., and Representatives Peter Welch, D-Vt., and Lance Gooden, R-Texas. NACS is a founding member of the MPC.
“This legislation … will bring much-needed competition into the United States credit card market, which has been dominated by only two players for far too long,” the letter said. “As members of the retail community and champions of the free market, we typically do not support government intervention except in cases where a market is not functioning. That is the case with the credit card marketplace in the United States.”
The letter was signed by 1,802 merchant companies, an increase of 134 over a similar letter sent to lawmakers in September. A separate letter sent by 236 state and national trade associations representing merchants emphasized the impact of swipe fees on small businesses.
“Passing this bill is one of the most important things Congress can do to provide relief for small businesses and consumers struggling amid near-record inflation in every state and congressional district,” the trade associations said. “While this legislation would benefit all merchants, it is small retailers who are calling for swipe fee reform more than any segment of our industry. Small retailers have the narrowest profit margins and fewest resources and are hit hardest by continuing unjustified increases in swipe fees.”
Swipe Fee Increases
Both letters cited swipe fees averaging over 2% 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 more than doubled over the past decade, soaring 25% last year alone to a record $137.8 billion. They are most merchants’ highest operating cost after labor and drove up consumer prices by about $900 a year for the average family last year.
“That number is likely even higher today,” the company letter said, referring to the $900 figure. “Because credit card swipe fees are a percentage of the transaction, they are an inflation multiplier” as prices go up.
Visa and Mastercard, which control more than 80% of the credit card market, centrally set the swipe fees charged by banks that issue cards under their brands rather than the banks competing to offer merchants the best deal. They also restrict processing to their own networks, prohibiting competition from other networks that can offer lower fees and better security.
“They bar their competitors from even having a shot at business with banks that issue their cards,” the company letter said. “This blocking of competition drives up prices for merchants and consumers, harms security and strangles innovation.”
The legislation would require that credit cards issued by the nation’s largest banks be enabled to be processed over at least two unaffiliated networks—Visa or Mastercard plus a network such as NYCE, Star or Shazam. American Express or Discover could also be the second network, but not networks supported by foreign governments like China’s UnionPay. The banks would decide which two networks to enable on a card and merchants would each then decide which to use when a transaction is made, requiring networks to complete over fees, security and service.
The bill would apply only to financial institutions with at least $100 billion in assets—about 30 of the nation’s largest banks and just one credit union—and would have no impact on community banks or small credit unions.
NACS is asking its members to contact their Members of Congress and ask them to co-sponsor the Credit Card Competition Act, S. 4674 and H.R. 8874, using the NACS Grassroots Portal. Congress must act to ensure that there is price competition on swipe fees and enable the U.S. to have an innovative and efficient credit card market.